Downloads
In most disability insurance programs beneficiaries lose some or all of their benefits if they earn above an earnings threshold. While intended to screen out applicants with high remaining working capacity, earnings limits can also distort the labor supply of beneficiaries. We develop a simple framework to evaluate this trade-off. We use a reduction in the earnings limit in Hungary to examine screening and labor supply responses. We find that the policy changed selection into the program modestly but reduced labor supply significantly. Viewed through the lens of our model, these findings suggest that the earnings threshold should be higher.
Authors
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Head of Institute for Labor Economics, Department of Economics, Vienna University Vienna University
![Daniel Prinz](/sites/default/files/styles/square_desktop/public/2022-06/Daniel_Prinz.jpg?itok=sTIJ6Hnf)
Research Associate World Bank
Daniel is an economist at the World Bank. His research covers topics in public finance, including social insurance, taxation, and inequality.
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Judit Krekó
Working Paper details
- DOI
- 10.1920/wp.ifs.2022.2022
- Publisher
- Institute for Fiscal Studies
Suggested citation
J, Kreko and D, Prinz and A, Weber. (2022). Take-up and labour supply responses to disability insurance earnings limits. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/take-and-labour-supply-responses-disability-insurance-earnings-limits (accessed: 30 June 2024).
More from IFS
Understand this issue
![Microphone](/sites/default/files/styles/square_desktop/public/2024-06/Microphone.jpg?itok=soM7Wvbz)
Election Special: Your questions answered
27 June 2024
![Tom Waters](/sites/default/files/styles/square_desktop/public/2024-06/tom%20waters.jpg?itok=faDtwS3F)
What is the two-child limit in benefits?
27 June 2024
![Kier Starmer](/sites/default/files/styles/square_desktop/public/2024-06/Lab1.jpg?itok=43eIsvgM)
Election Special: The Labour manifesto explained
14 June 2024
Policy analysis
![Welsh town with mountains behind](/sites/default/files/styles/square_desktop/public/2024-06/Welsh-town-feature.jpg?itok=5axb5wZn)
How would the parties’ tax and spending plans affect Scotland and Wales?
28 June 2024
![Polling station](/sites/default/files/styles/square_desktop/public/2024-06/Polling-station-school.jpg?itok=uS-l6b-1)
What are the parties’ plans for benefits and taxes?
24 June 2024
![Shopping street](/sites/default/files/styles/square_desktop/public/2024-06/Street-scene-.jpg?itok=R39cR6Xp)
How do the last five years measure up on levelling up?
19 June 2024
Academic research
![Working paper cover](/sites/default/files/styles/portrait/public/2024-06/WP202428-The-impact-of%20labour-demand-shocks-when-occupational-labour-supplies-are-heterogeneous.jpg?itok=Erq9-V9O)
The impact of labour demand shocks when occupational labour supplies are heterogeneous
28 June 2024
![Working Paper Cover](/sites/default/files/styles/portrait/public/2024-04/WP202413-Labour-market-inequality-and-the-changing-life-cycle-profile-of-male-and-female-wages_Page_001.jpg?itok=FGFp0iFj)
Labour market inequality and the changing life cycle profile of male and female wages
15 April 2024
![Working Paper Cover](/sites/default/files/styles/portrait/public/2024-04/WP202414-Interpreting-cohort-profiles-of-lifecycle-earnings-volatility_Page_01.jpg?itok=PhiPLJpT)
Interpreting cohort profiles of lifecycle earnings volatility
15 April 2024