Earnings responses to disability insurance stringency
2020
Accurate assessment of earnings capacity is critical to the efficient operation of disability insurance (DI) programs.
We use administrative data on the universe of Dutch DI recipients to estimate employment and earnings responses
to reassessment of their earnings capacity under more stringent rules. We estimate that reassessment of recipients
aged 30–44 removed 17 percent from the program and reduced benefit income by 20 percent, on average. In
response, employment increased by 6.7 percentage points and earnings rose by 18 percent. Recipients were able
to increase earnings by € 636 for every € 1000 reduction in DI benefit. This earnings response was strongest from
those with more subjectively defined disabilities and a shorter claim duration, as well as younger and female
recipients.
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