American Economic Review Vol. 104 No. 2 2014

How Financial Incentives Induce Disability Insurance Recipients to Return to Work

Andreas Kostøl¹; Magne Mogstad²

¹ Research Department, Statistics Norway, PO Box 8131 Dep. NO-0033 Oslo, Norway, and University of Bergen (e-mail: ) · ² Department of Economics, University College London, Gower Street, London WC1E 6BT, UK, and Statistics Norway (e-mail: )

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.

DOI

10.1257/aer.104.2.624

Volume

104

Issue

2

Pages

624-655

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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