Template-type: ReDif-Paper 1.0
Author-Name: Marie Olivier 
Author-Name: Vall Castello Judit 
Author-workplace-name: METEOR
Title: Measuring the (Income) Effect of Disability Insurance Generosity on Labour Market Participation
Abstract: We analyze the employment effect of a law that provides for a 36 percent increase in thegenerosity of disability insurance (DI) for claimants who are, as a result of their lack of skillsand of the labour market conditions they face, deemed unlikely to find a job. The selectionprocess for treatment is therefore conditional on having a low probability of employment, makingevaluation of its effect intrinsically difficult. We exploit the fact that the benefit increase isonly available to individuals aged 55 or older, estimating its impact using a regressiondiscontinuity approach. Our first results indicate a large drop in employment for disabledindividuals who receive the increase in the benefit. Testing for the linearity of covariatesaround the eligibility age threshold reveals that the age at which individuals start claiming DIis not continuous: the benefit increase appears to accelerate the entry rate of individuals aged55 or over. We obtain new estimates excluding this group of claimants, and find that the policydecreases the employment probability by 8 percent. We conclude that the observed DI generosityelasticity of 0.22 on labour market participation is mostly due to income effects since benefitreceipt is not work contingent in the system studied.
Keywords: labour organization; 
Series: Research Memoranda
Creation-Date: 2011
Number: 050
File-URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:f65d55dd-729f-4b16-9cc4-068dc4150e4d/datastreams/ASSET1/content
File-Format: application/pdf
File-Size: 452591
Handle: RePEc:unm:umamet:2011050