Disability benefit generosity and labor force withdrawal

Abstract

A key component for estimating the optimal size and structure of disability insurance (DI) programs is the elasticity of DI claiming with respect to benefit generosity. Yet, in many countries, including the United States, all workers face identical benefit schedules, which are a function of one’s labor market history, making it difficult to separate the effect of the benefit level from the effect of unobserved preferences for work on individuals’ claiming decisions. To circumvent this problem, we exploit exogenous variation in DI benefits in Austria arising from several reforms to its DI and old age pension system in the 1990s and 2000s. We use comprehensive administrative social security records data on the universe of Austrian workers to compute benefit levels under six different regimes, allowing us to identify and precisely estimate the elasticity of DI claiming with respect to benefit generosity. We find that, over this time period, a one percent increase in potential DI benefits was associated with a 1.2 percent increase in DI claiming.

Impact of Turkish policy reform on labor force status of disabled males: A difference-in-difference analysis

“…They find that longer processing times reduce the employment of disabled applicants. Using data from Austria, Mullen and Staubli (2016) examine how the disability insurance program changes the labor supply decisions of disabled individuals. According to their results, an increase in disability insurance program benefits is associated with a decrease in the employment of disabled individuals.…”

An imperfect wealth tax and employment in closely held firms

“…2010), and the impact of disability insurance benefits on labour supply in Norway (Fevang et al . 2017) and Austria (Mullen and Staubli 2016). Our identification strategy is also similar in spirit to the approach used in the taxable income literature—for example, by Gruber and Saez (2002) and Kleven and Schultz (2014)—to estimate the elasticity of taxable income on the basis of tax reforms.…”

“…Identification strategies akin to ours have been used previously in studies of the impacts of unemployment benefits on unemployment duration in Norway and Sweden (Røed et al 2008), the impact of student aid on college enrolment in Denmark (Nielsen et al 2010), and the impact of disability insurance benefits on labour supply in Norway (Fevang et al 2017) and Austria (Mullen and Staubli 2016). Our identification strategy is also similar in spirit to the approach used in the taxable income literature-for example, by Gruber and Saez (2002) and Kleven and Schultz (2014)-to estimate the elasticity of taxable income on the basis of tax reforms.…”

Take-Up and Labor Supply Responses to Disability Insurance Earnings Limits

“…More broadly, this work contributes to the literature on the work disincentives of DI programs and the literature that studies the labor supply impacts of DI receipt (e.g., Bound, 1989;Gruber, 2000;Chen and van der Klaauw, 2008;Maestas, Mullen and Strand, 2013;Low and Pistaferri, 2015;Mullen and Staubli, 2016). This literature has focused on understanding the effects of disability programs on labor supply taking into account all features of the programs as implemented.…”

“…Other screening mechanisms include medical screening (de Jong, Lindeboom and van derKlaauw, 2011;Liebert, 2019;Godard, Koning and Lindeboom, 2022), benefit amounts(Mullen and Staubli, 2016), wait times(Kearney, Price and Wilson, 2021), and hassle costs(Deshpande and Li, 2019).…”