Social Support Substitution and the Earnings Rebound: Evidence from a Regression Discontinuity in Disability Insurance Reform

By Lex Borghans, A. Gielen, Erzo F. P. Luttmer. Social Science Research Network, 2011

130 citations recorded by the source corpus.

In this paper, we exploit a cohort discontinuity in the stringency of the 1993 Dutch disability reforms to obtain causal estimates of the effects of decreased generosity of disability insurance (DI) on behavior of existing DI recipients. We find evidence of substantial “social support substitution”: individuals on average offset a euro of lost DI benefits by collecting 31 cents more from other social assistance programs. This benefit-substitution effect declines somewhat over time, but is still a significant 20% eight years later. Individuals also exhibit a strong rebound in earnings: labor earnings increase by 62 cents on average per euro of lost DI benefits. This is novel evidence of substantial remaining earnings capacity in a sample of long-term claimants of DI. On average, individuals make up for almost the entire DI benefit reduction through increases in other forms of social assistance and in labor earnings.

Subfields: Demography, Economics and Econometrics, General Health Professions

View Paper: https://www.semanticscholar.org/paper/5f738d548920ec0556b4e1c28563937b89076eb1

Citations in the corpus

• Disability Benefits, Consumption Insurance, and Household Labor Supply (2019, unknown): “See also Autor & Duggan (2003) and Borghans et al. (2014) for empirical evidence on the interaction between disability insurance and other transfer programs in the U.S. and Netherlands.”