Financial work incentives for disability benefit recipients: Lessons from a randomized field experiment

Monika Buetler (), Michael Lechner, Petra Thiemann, Eva Deuchert () and Stefan Staubli
Authors registered in the RePEc Author Service: Monika Bütler ()

No 1406, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: Disability insurance (DI) beneficiaries lose some of their benefits if their earnings exceed certain thresholds (“cash-cliffs”). When this reduction is too high, this implicit taxation of earnings is considered to be one of the prime reasons for the low outflow from DI. This paper analyzes a conditional cash program that incentivizes work related reductions of disability benefits in Switzerland. A randomized group of DI beneficiaries receive the offer to claim a payment of up to CHF 72,000 (USD 71,000) if they take up or expand employment and reduce DI claims. This paper presents the results of the short-term evaluation by analyzing the first reactions to the announcement of seed capital. Overall, the interest in taking-up the financial incentive is low at only 3%. Individuals close to cash-cliffs react more on seed capital but the overall magnitude is small. Our results suggest that work-disincentives imposed by cash-cliffs are unlikely to be the main driver for low employment and outflow from the Swiss disability insurance system, despite the fact that the partial disability insurance system generates a non-linear budget set and bunching behavior at cash-cliffs prior to the implementation of seed capital.

Keywords: Disability insurance; field experiment; financial incentive (search for similar items in EconPapers)
JEL-codes: C93 D04 H55 J14 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-02
New Economics Papers: this item is included in nep-exp, nep-ias and nep-lab
References: Add references at CitEc
Citations: View citations in EconPapers (5)

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http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1406.pdf (application/pdf)

Related works:
Journal Article: Financial work incentives for disability benefit recipients: lessons from a randomised field experiment (2015)
Working Paper: Financial Work Incentives for Disability Benefit Recipients: Lessons from a Randomised Field Experiment (2014)
Working Paper: Financial work incentives for disability benefit recipients: Lessons from a randomized field experiment (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2014:06

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