Social support substitution and the earnings rebound: Evidence from a regression discontinuity in disability insurance reform

L. Borghans, A.C. Gielen, E.F.P. Luttmer

Research output: Contribution to journalArticleAcademicpeer-review

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.
Original languageEnglish
Pages (from-to)34-70
Number of pages37
JournalAmerican Economic Journal-Economic Policy
Volume6
Issue number4
DOIs
Publication statusPublished - Nov 2014

Keywords

  • LABOR-FORCE PARTICIPATION
  • CHILD SSI
  • UNEMPLOYMENT-INSURANCE
  • REJECTED APPLICANTS
  • PROGRAM
  • IMPACT
  • POLICY
  • WORK
  • RISE
  • GENEROSITY

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