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Income and Substitution Effects of a Disability Insurance Reform

Author

Listed:
  • Eugster, Beatrix
  • Deuchert, Eva
Abstract
Disability insurance (DI) systems are widely criticized for their inherent work disincentives. This paper evaluates the effects of a Swiss DI reform that aims to lower pensions for a group of existing DI bene?ciaries and introduces an additional notch to the pension schedule. The reform does not signi?cantly affect average earnings and employment, but increases the disability degree of those threatened by a pension decline. We estimate bounds on the income and substitution effects employing the principal strati?cation framework. The in-come effect is quantitatively important, while the substitution e?ect is smaller and bounds include zero.

Suggested Citation

  • Eugster, Beatrix & Deuchert, Eva, 2017. "Income and Substitution Effects of a Disability Insurance Reform," Economics Working Paper Series 1709, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2017:09
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    References listed on IDEAS

    as
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    Cited by:

    1. Agar Brugiavini & Petru Crudu, 2023. "The Role of Disability Insurance on the Labour Market Trajectories of Europeans," Working Papers 2023:20, Department of Economics, University of Venice "Ca' Foscari".
    2. Garcia-Mandicó, Sílvia & García-Gómez, Pilar & Gielen, Anne C. & O’Donnell, Owen, 2020. "Earnings responses to disability insurance stringency," Labour Economics, Elsevier, vol. 66(C).
    3. Zimmermann, Laura, 2020. "Why Guarantee Employment? Evidence from a Large Indian Public-Works Program," GLO Discussion Paper Series 504, Global Labor Organization (GLO).
    4. Liebert, Helge, 2019. "Does external medical review reduce disability insurance inflow?," Journal of Health Economics, Elsevier, vol. 64(C), pages 108-128.
    5. Myhre, Andreas, 2021. "Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs," MPRA Paper 109547, University Library of Munich, Germany.
    6. Tuuli Paukkeri & Terhi Ravaska, 2024. "Labour Supply Responses to Reducing the Risk of Losing Disability Insurance Benefits," Working Papers 20, Finnish Centre of Excellence in Tax Systems Research.
    7. Paukkeri, Tuuli & Ravaska, Terhi, 2024. "Labour supply responses to reducing the risk of losing disability insurance benefits," Working Papers 163, VATT Institute for Economic Research.
    8. Tunga Kantarcı & Jan‐Maarten van Sonsbeek & Yi Zhang, 2023. "The heterogeneous impact of stricter criteria for disability insurance," Health Economics, John Wiley & Sons, Ltd., vol. 32(9), pages 1898-1920, September.

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    More about this item

    Keywords

    Disability insurance; work disincentives; income and substitution effects; partial bene?t system;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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