American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Social Support Substitution and the Earnings Rebound: Evidence from a Regression Discontinuity in Disability Insurance Reform
American Economic Journal: Economic Policy
vol. 6,
no. 4, November 2014
(pp. 34–70)
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.Citation
Borghans, Lex, Anne C. Gielen, and Erzo F. P. Luttmer. 2014. "Social Support Substitution and the Earnings Rebound: Evidence from a Regression Discontinuity in Disability Insurance Reform." American Economic Journal: Economic Policy, 6 (4): 34–70. DOI: 10.1257/pol.6.4.34Additional Materials
JEL Classification
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
- J22 Time Allocation and Labor Supply
- J28 Safety; Job Satisfaction; Related Public Policy
- J31 Wage Level and Structure; Wage Differentials
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