Document Type

Article

Publication Date

11-2014

Publication Title

American Economic Journal - Economic Policy

Abstract

We exploit a cohort discontinuity in the stringency of Dutch disability reforms to estimate the effects of decreased DI (disability insurance) generosity on behavior of existing recipients. We find evidence of social support substitution: individuals on average offset €1.00 of lost DI benefits by collecting €0.30 more from other social assistance programs, but this benefit-substitution effect declines over time. Individuals also exhibit a rebound in earnings: earnings increase by €0.62 on average per euro of lost DI benefits and this effect remains roughly constant over time. This is strong evidence of substantial remaining earnings capacity among long-term claimants of DI.

DOI

10.1257/pol.6.4.34

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