Take-up and Labor Supply Responses to Disability Insurance Earnings Limits

Arbeitspapier

In most disability insurance programs beneficiaries lose some or all of their benefits if they earn above an earnings threshold. While intended to screen out applicants with high remaining working capacity, earnings limits can also distort the labor supply of beneficiaries. We develop a simple framework to evaluate this trade-off. We use a reduction in the earnings limit in Hungary to examine screening and labor supply responses. We find that the policy changed selection into the program modestly but reduced labor supply significantly. Viewed through the lens of our model, these findings suggest that the earnings threshold should be higher.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 15377

Classification and Topics

• Classification: Wirtschaft ; National Government Expenditures and Welfare Programs ; Social Security and Public Pensions ; Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs ; Time Allocation and Labor Supply
• Subject: disability insurance ; policy reform ; earnings limit ; labor supply

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Krekó, Judit ; Prinz, Daniel ; Weber, Andrea
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/263593
• Last update: 10.03.2025, 11:46 AM CET