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Disability Insurance as a Complement to Labor Income: Evidence From Italian Administrative Data

Year: 2025

Type: article

Abstract: We investigate how disability insurance (DI) generosity affects DI take-up and labor market participation in a setting where benefits can be cumulated with substantial labor earnings. Using rich administrative data on Italian private-sector workers and a Regression Discontinuity in Time design, we find a large behavioral response to DI generosity, with an elasticity of 1.26 in DI take-up, while employment effects are minor and concentrated among immigrants. Our identification strategy exploits a major social security reform that reduced the expected DI replacement rate and generated a clear income effect. To address unobserved heterogeneity and the unobservability of underlying disability, we focus on individuals affected by acute cardiovascular shocks whose DI eligibility is plausibly exogenous. Overall, our results suggest that when earnings cumulability is extensive, DI is widely perceived as a complement to labor income. This has important implications for the design of labor-inclusive DI schemes.

Source: Health Economics

DOI: 10.1002/hec.70072

Authors: Zantomio Francesca, Belloni Michele, Carrieri Vincenzo, Farina Elena, Simonetti Irene

Institutions: Ca' Foscari University of Venice, Collegio Carlo Alberto, University of Turin, University of Calabria, University of Amsterdam

Language: English

Topic: Retirement, Disability, and Employment

Subfield: Demography

Field: Social Sciences

Domain: Social Sciences

SDGs: Decent work and economic growth, Reduced inequalities, Good health and well-being, No poverty

Open Access status: green

OpenAlex ID: W4417300081

FWCI:

Cites: 37

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