Disability policy and the labor market: Evidence from a natural experiment in Canada, 1998-2006

Abstract This paper examines the effect of changes in two key parameters in disability policy: a) the earnings that disability insurance beneficiaries are allowed to earn without losing their disability benefits; and b) automatic reinstatement where beneficiaries can have benefits reinstated without re-application, and re-testing for disability determination. We examine the effects of these policy changes on the probability of employment for disability beneficiaries as well as the flows onto and off the disability rolls. We obtain our estimates using a difference-in-difference strategy that exploits the unique structure of disability insurance arrangements in Canada, namely that there are two programs: one that covers individuals in the province of Quebec, and one in the rest of Canada. Our preferred estimates indicate that the introduction of the allowable earnings change increased the propensity of disability beneficiaries to work, but we do not find that the earnings exemption had an effect on the flows on to or off the disability rolls. In contrast, we find that the introduction of the automatic reinstatement policy did not have an effect on any of the outcomes we examine.

[1]  Hennessey Jc,et al.  Effect of substantial gainful activity level on disabled beneficiary work patterns. , 1979 .

[2]  Identification and Inference in Nonlinear Difference-in-Differences Models , 2006 .

[3]  Stephen G. Donald,et al.  Inference with Difference-in-Differences and Other Panel Data , 2007, The Review of Economics and Statistics.

[4]  David H. Autor,et al.  The Rise in the Disability Rolls and the Decline in Unemployment , 2003 .

[5]  Timothy G. Conley,et al.  Inference with “Difference in Differences” with a Small Number of Policy Changes , 2005, The Review of Economics and Statistics.

[6]  R. Warner,et al.  The economic life of seriously mentally ill people in the community. , 1996, Psychiatric services.

[7]  R. Moffitt,et al.  Tax Rates and Work Incentives in the Social Security Disability Insurance Program: Current Law and Alternative Reforms , 1997, National Tax Journal.

[8]  J. Angrist,et al.  Consequences of Employment Protection? The Case of the Americans with Disabilities Act , 1998, Journal of Political Economy.

[9]  Maximilian D. Schmeiser,et al.  The Importance of Anti-Discrimination and Workers' Compensation Laws on the Provision of Workplace Accommodations following the Onset of a Disability , 2012 .

[10]  M. Campolieti.  Worker Adaptation and the Desire for Accommodations after the Onset of a Disability , 2009 .

[11]  J. Gruber.  Disability Insurance Benefits and Labor Supply , 1996, Journal of Political Economy.

[12]  Michael Baker,et al.  Early Retirement Provisions and the Labor Force Behavior of Older Men: Evidence from Canada , 1999, Journal of Labor Economics.

[13]  David Card,et al.  Education, Earnings, and the , 1998 .

[14]  D. Linhorst.  Empowering People with Severe Mental Illness: A Practical Guide , 2005 .

[15]  Michael Baker,et al.  How do retirement tests affect the labour supply of older men , 1999 .

[16]  A. Nichols,et al.  Tracking the Household Income of SSDI and SSI Applicants , 2001 .

[17]  E. Duflo,et al.  How Much Should We Trust Differences-in-Differences Estimates? , 2001 .

[18]  R. Burkhauser,et al.  Chapter 51 Economic analysis of transfer programs targeted on people with disabilities , 1999 .

[19]  M. Campolieti,et al.  Disability Insurance Benefits and Labor Supply: Some Additional Evidence , 2004, Journal of Labor Economics.

[20]  M. Campolieti.  The Ins and Outs of Unemployment in Canada, 1976-2008 (Entrées et Sorties du Chômage AU Canada, 1976-2008) , 2011 .

[21]  R. Warner,et al.  Employment, attitudes toward work, and quality of life among people with schizophrenia in three countries. , 1998, Schizophrenia bulletin.

[22]  David Card,et al.  Education, Earnings, and the "Canadian G.I. Bill" , 1998 .

[23]  R. Warner.  Work disincentives in US disability pension programs , 2001 .