Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design / Philippe Ruh, Stefan Staubli.

Format:

Book

Author/Creator:

Ruh, Philippe.

Contributor:

National Bureau of Economic Research.

Staubli, Stefan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24830.

NBER working paper series no. w24830

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Financial Incentives and Earnings of Disability Insurance Recipients

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

Most countries reduce Disability Insurance (DI) benefits for beneficiaries earning above a specified threshold. Such an earnings threshold generates a discontinuous increase in tax liability--a notch--and creates an incentive to keep earnings below the threshold. Exploiting such a notch in Austria, we provide transparent and credible identification of the effect of financial incentives on DI beneficiaries' earnings. Using rich administrative data, we document large and sharp bunching at the earnings threshold. However, the elasticity driving these responses is small. Our estimate suggests that relaxing the earnings threshold reduces fiscal cost only if program entry is very inelastic.

Notes:

Print version record

July 2018.