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Disability Benefit Generosity and Labor Force Withdrawal

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  • Staubli, Stefan
  • Mullen, Kathleen J.

Abstract

A key component for estimating the optimal size and structure of disability insurance (DI) programs is the elasticity of DI claiming with respect to benefit generosity. Yet, in many countries, including the United States, all workers face identical benefit schedules, which are a function of one?s labor market history, making it difficult to separate the effect of the benefit level from the effect of unobserved preferences for work on individuals? claiming decisions. To circumvent this problem, we exploit exogenous variation in DI benefits in Austria arising from several reforms to its DI and old age pension system in the 1990s and 2000s. We use comprehensive administrative social security records data on the universe of Austrian workers to compute benefit levels under six different regimes, allowing us to identify and precisely estimate the elasticity of DI claiming with respect to benefit generosity. We find that, over this time period, a one percent increase in potential DI benefits was associated with a 1.2 percent increase in DI claiming.

Suggested Citation

  • Staubli, Stefan & Mullen, Kathleen J., 2015. "Disability Benefit Generosity and Labor Force Withdrawal," CEPR Discussion Papers 10987, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10987
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    More about this item

    Keywords

    Benefit generosity; Claiming elasticity; Disability insurance; Labor force withdrawal;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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