TY - JOUR
T1 - The added worker effect
T2 - evidence from a disability insurance reform
AU - Bernasconi, Mario
AU - Kantarcı, Tunga
AU - van Soest, Arthur
AU - van Sonsbeek, Jan Maarten
N1 - Publisher Copyright:
© 2024, The Author(s).
PY - 2024/1/3
Y1 - 2024/1/3
N2 - The Netherlands reformed its disability insurance (DI) scheme in 2006. Reintegration incentives for employers became stronger, access to DI benefits became more difficult, and benefits became less generous. Using administrative data on all individuals who fell sick shortly before and after the reform, we study the impact of the reform on labor participation of individuals who fell sick and their spouses. Difference-in-differences estimates show, among other things, that the reform led to an increase of labor participation of the individuals who fell sick only if these individuals had a permanent job, whereas spouses responded to the DI reform in other cases, where the individuals reporting sick had a temporary job or were unemployed. More generally, the spouses respond when the sick individual’s labor market position is weak and the individual him- or herself has trouble finding or retaining employment. The effects are persistent during the 10 years after the reform. The effect on the spouse can be seen as an “added worker effect,” where additional earnings of the spouse compensate for the sick individual’s income loss so that both partners share the burden of a more stringent DI scheme. Comparing individuals reporting sick with and without partner provides further support for the notion that the responses of couples to the reform are joint decisions of the two partners.
AB - The Netherlands reformed its disability insurance (DI) scheme in 2006. Reintegration incentives for employers became stronger, access to DI benefits became more difficult, and benefits became less generous. Using administrative data on all individuals who fell sick shortly before and after the reform, we study the impact of the reform on labor participation of individuals who fell sick and their spouses. Difference-in-differences estimates show, among other things, that the reform led to an increase of labor participation of the individuals who fell sick only if these individuals had a permanent job, whereas spouses responded to the DI reform in other cases, where the individuals reporting sick had a temporary job or were unemployed. More generally, the spouses respond when the sick individual’s labor market position is weak and the individual him- or herself has trouble finding or retaining employment. The effects are persistent during the 10 years after the reform. The effect on the spouse can be seen as an “added worker effect,” where additional earnings of the spouse compensate for the sick individual’s income loss so that both partners share the burden of a more stringent DI scheme. Comparing individuals reporting sick with and without partner provides further support for the notion that the responses of couples to the reform are joint decisions of the two partners.
KW - added worker effect
KW - D13
KW - differences-in-differences
KW - disability insurance
KW - H31
KW - household behaviour
KW - I13
KW - I38
KW - J14
KW - j22
KW - program evaluation
UR - http://www.scopus.com/inward/record.url?scp=85181239409&partnerID=8YFLogxK
U2 - 10.1007/s11150-023-09692-4
DO - 10.1007/s11150-023-09692-4
M3 - Article
AN - SCOPUS:85181239409
SN - 1569-5239
JO - Review of Economics of the Household
JF - Review of Economics of the Household
ER -