Induced Entry in Disability Insurance: Evidence from Canada
Disability insurance (DI) programs are large and experienced substantial growth over the last decades. This paper studies the induced entry effect of two important DI program parameters: (i) DI benefit generosity and (ii) financial work incentives for DI recipients. Using two Canadian DI reforms and administrative tax records from 20 percent of Canadians, we find that more generous DI benefits induce substantial entry into DI. Specifically, a 1,000 CAD increase in benefits increases average DI take up by 0.126 percentage points, implying a DI take up elasticity with respect to benefits of 0.67. On the other hand, we find that the introduction of an earnings disregard has a quantitatively small effect on labor supply and entry into DI. Specifically, a 1,000 CAD increase in the earnings disregard leads to induced entry of 0.002 percentage points.
More from NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
