Incapacity benefits and employment policy

Arbeitspapier

The paper explores the employment implications of allowing people the opportunity of using a portion of their incapacity benefits to provide employment vouchers for employers that hire them. The analysis indicates that introducing this policy could increase employment, raise the incomes of incapacity benefit recipients, and reduce employers? labor costs. The analysis explicitly derives the optimal voucher, i.e. the voucher that maximizes employment at no extra budgetary cost. This voucher is shown to depend on the size of incapacity benefits, the separation rate in the absence of the voucher, and the degree of displacement; but it does not depend on the hiring rate. Numerical calculations show the optimal voucher to be large by the standards of many existing employment subsidies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 529

Classification and Topics

• Classification: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Labor Demand ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: employment policy ; labor force participation ; incapacity benefits ; Arbeitslosenversicherung ; Beschäftigungspolitik ; Arbeitsangebot ; Lohnsubvention ; Voucher ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Orszag, Jonathan Michael ; Snower, Dennis J.
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/2803
• Last update: 10.03.2025, 11:45 AM CET