Disability insurance benefits and labor supply decisions: evidence from a discontinuity in benefit awards

Müller, Tobias Benjamin; Boes, Stefan (2020). Disability insurance benefits and labor supply decisions: evidence from a discontinuity in benefit awards Empirical economics, 58(5), pp. 2513-2544. Springer 10.1007/s00181-018-1587-4

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The effect of disability insurance (DI) benefits on the labor supply of individuals is a disputed topic in both academia and policy. We identify the impact of DI benefits on working full-time, working part-time or being out of the labor force by exploiting a discontinuity in the DI benefit award rate in Switzerland above the age of 56. Using rich survey data and a discrete endogenous switching model, we find that DI benefit receipt increases the probability of working part-time by approximately 32% points, decreases the probability of working full-time by approximately 35% points and has little effect on the probability of being out of the labor force for the average beneficiary. Looking at the treatment effect distribution, we find that male, middle- to high-income and relatively healthy DI beneficiaries are more likely to adjust their labor supply from full-time to part-time, whereas women, low-income and ill beneficiaries tend to drop out of the labor market. Our results shed new light on the mechanisms explaining low DI outflow rates and may help better target interventions.

Item Type:	Journal Article (Original Article)
Division/Institute:	School of Health Professions School of Health Professions > Institute of Health Economics and Health Policy
Name:	Müller, Tobias Benjamin and Boes, Stefan
ISSN:	2513–2544
Publisher:	Springer
Language:	English
Submitter:	Tobias Benjamin Müller
Date Deposited:	14 Nov 2023 14:42
Last Modified:	19 Nov 2023 01:38
Publisher DOI:	10.1007/s00181-018-1587-4
Uncontrolled Keywords:	Disability insurance · Labor market participation · Fuzzy regression discontinuity design · Discrete endogenous switching models · Maximum simulated likelihood
ARBOR DOI:	10.24451/arbor.20299
URI:	https://arbor.bfh.ch/id/eprint/20299