Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design

Ruh, Philippe; Staubli, Stefan

doi:10.3386/w24830

Cited by 14 publications

(22 citation statements)

References 23 publications

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“…find that replacing a notch at the exemption threshold with a kink in the Norwegian DI program was likely to reduce program costs. In contrast, Ruh & Staubli (2019) exploit a notch in the Austrian DI program, and conclude that abolishing the notch would increase program costs. 8 They find that most of the increased government revenue comes from extensive margin responses if the benefit schedule is relaxed.…”

Section: Introductionmentioning

confidence: 95%

“…If one does not account for this response, the response of the marginal bunching individual will be overstated and the estimated elasticity upward biased. In order to adjust for extensive margin responses, I follow Ruh & Staubli (2019) and assume that the distribution of recipients who stop working is the same as the observed earnings distribution above the kink. 33 In Section 6, I show that the estimated elasticity is very close to the theoretical elasticity when incorporating this adjustment procedure in a simulation exercise.…”

Section: Threats To Identificationmentioning

confidence: 99%

“…5 Saez (2010); Chetty et al (2011); Bastani & Selin (2014); Paetzold (2019) find elasticities in the range of 0-0.05 among wage earners. Zaresani (2020) and Ruh & Staubli (2019) estimate structural earnings elasticities of 0.20 and 0.27 using a kink in the Canadian DI program and a notch in Austrian DI program, respectively. Gelber et al, 2020b find an observed elasticity of 0.19 in the US social security program.…”

Section: Introductionmentioning

confidence: 99%

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Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs

Myhre

2021

SSRN Journal

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While kinks are prevalent in tax and transfer systems, the fiscal revenue and behavioral responses are not fully understood. In disability insurance (DI) programs, for instance, kinks help balance the moral hazard effects from the induced entry with the provision of work incentives for recipients who regain their ability to work. Using quasi-random variation in kink points in the benefit schedule for Norwegian DI recipients, I identify intensive and extensive margin earnings responses to the implicit tax on earnings as DI benefits are phased out above the kink. To identify the intensive margin responses, I implement a non-parametric bunching design that does not require functional form assumptions or deciding an excluded region around the kink. Responses correspond to an earnings elasticity with respect to the implicit net-of-tax rate of about 0.18. Using a regression discontinuity design, I further show that the kink in the benefit schedule induces significant responses at the extensive margin. I use the estimated earnings responses to evaluate how the benefit offset affects program costs, and find that relaxing the benefit offset reduces public expenditures only if program entry is very inelastic. My findings speak to recent policy-proposals aiming to improve work incentives of DI recipients.

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Section: Introductionmentioning

confidence: 95%

Section: Threats To Identificationmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs

Myhre

2021

SSRN Journal

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“…For example, beneficiaries continue to receive all SSDI benefits after initially returning to work, but may eventually lose their cash benefits completely after engaging in substantial work activity (with earnings above a threshold level set by SSA) for a sustained amount of time-a phenomenon commonly called the "cash cliff". This complete loss of benefits may inhibit some beneficiaries from engaging in substantial work (Ruh & Staubli, 2019;Schimmel, Stapleton, & Song, 2011;Stapleton, O'Day, Livermore, & Imparato, 2006). Qualitative evidence suggests that both the fear of losing benefits and confusion related to the complexity of SSDI rules can inhibit work (O'Day, Martin, Burak, Freeman, Feeney, Lim, Kelley, & Morrison, 2016).…”

Section: Overview Of Podmentioning

confidence: 99%

Using behavioral outreach to counteract administrative burden and encourage take-up of simplified disability payment rules

Hock

Jones

Levere

et al. 2021

JBPA

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Take-up of employment programs among people with disabilities can be limited by the administrative burdens of decision-making, which must factor in the complexities of how work affects disability cash assistance payments. This study presents evidence on using outreach motivated by behavioral research to encourage enrollment in a pilot initiative with the Social Security Administration that simplified Social Security Disability Insurance payment rules. Because enrolling would leave some beneficiaries worse off, informed enrollment decisions required understanding both the complexities of current rules and potential effects of the new demonstration rules. We sought to counteract bottlenecks stemming from decision-making burdens through increased outreach with tailored messaging. A randomized controlled trial was used to test two features of a reminder postcard. First, we compared fold-over postcards containing information about the demonstration to open postcards with more generic information, finding that fold-over postcards increased enrollment by around 25 percent (or 0.12 percentage points). Second, we compared an urgent message framing with no stated enrollment end-date to a deadline framing with an explicit enrollment cutoff date. Although the final enrollment rate was similar across timeline framing options, the urgent framing appears to have resulted in faster enrollment.

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“…For example, Hoynes and Moffitt (1999); Benitez-Silva et al (2011); Weathers II and Hemmeter (2011);and Bütler et al (2015) find no effects of financial incentives to work in the US and Switzerland. However, Campolieti and Riddell (2012); Kostol and Mogstad (2014); and Ruh and Staubli (2016) find positive responses in Canada, Norway and Austria. Zaresani (2017) suggests that the relative size of the incentives to work induced by a program versus the adjustment costs that individuals face when changing their labor supply could possibly explain these disparate findings.…”

mentioning

confidence: 91%

Return-to-Work Policies and Labor Supply in Disability Insurance Programs

Zaresani

2018

AEA Papers and Proceedings

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Return-to-work policies in disability insurance (DI) programs allow beneficiaries to collect a portion of their benefits while working. I investigate whether a large increase in incentives to work in a return-to-work policy could induce benefit recipients to increase their labor supply. I quantify the effects on earnings and labor force participation using a sharp discontinuity in the induced incentives to work at the month of the policy change in a DI program in Canada. Using administrative data, I document that large incentives to work could induce beneficiaries to increase their labor supply both in intensive and extensive margins.

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Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design

Cited by 14 publications

References 23 publications

Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs

Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs

Using behavioral outreach to counteract administrative burden and encourage take-up of simplified disability payment rules

Return-to-Work Policies and Labor Supply in Disability Insurance Programs

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