TY - JOUR

T1 - Do disability benefits hinder work resumption after recovery?

AU - Koning, Pierre

AU - Muller, Paul

AU - Prudon, Roger

PY - 2022/3/31

Y1 - 2022/3/31

N2 - While a large share of Disability Insurance recipients in OECD countries are expected to recover, outflow rates from temporary disability schemes are typically negligible. We estimate the disincentive effects of disability benefits on the response to a (mental) health improvement using administrative data on all Dutch disability benefit applicants. We compare those below the DI eligibility threshold with those above and find that disincentives significantly reduce work resumption after health improves. Approximately half of the response to recovery is offset by benefits. Estimates from a structural labor supply model suggest that disincentives are substantially larger when the worker’s earnings capacity is fully restored.

AB - While a large share of Disability Insurance recipients in OECD countries are expected to recover, outflow rates from temporary disability schemes are typically negligible. We estimate the disincentive effects of disability benefits on the response to a (mental) health improvement using administrative data on all Dutch disability benefit applicants. We compare those below the DI eligibility threshold with those above and find that disincentives significantly reduce work resumption after health improves. Approximately half of the response to recovery is offset by benefits. Estimates from a structural labor supply model suggest that disincentives are substantially larger when the worker’s earnings capacity is fully restored.

U2 - 10.1016/j.jhealeco.2022.102593

DO - 10.1016/j.jhealeco.2022.102593

M3 - Journal article

VL - 82

JO - Journal of Health Economics

JF - Journal of Health Economics

SN - 0167-6296

M1 - 102593

ER -