American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
How Financial Incentives Induce Disability Insurance Recipients to Return to Work
American Economic Review
(pp. 624–55)
Abstract
Using a local randomized experiment that arises from a sharp discontinuity in Disability Insurance (DI) policy in Norway, we provide transparent and credible identification of how financial incentives induce DI recipients to return to work. We find that many DI recipients have considerable capacity to work that can be effectively induced by providing financial work incentives. We further show that providing work incentives to DI recipients may both increase their disposable income and reduce program costs. Our findings also suggest that targeted policies may be the most effective in encouraging DI recipients to return to work.Citation
Kostol, Andreas Ravndal, and Magne Mogstad. 2014. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work." American Economic Review 104 (2): 624–55. DOI: 10.1257/aer.104.2.624Additional Materials
JEL Classification
- D14 Household Saving; Personal Finance
- H55 Social Security and Public Pensions
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
- J22 Time Allocation and Labor Supply
- J28 Safety; Job Satisfaction; Related Public Policy