Periodic Reporting for period 1 - DLH (Disability benefits, labour force participation, and health: Evaluating the effect of social protection policies)
Reporting period: 2020-09-01 to 2022-08-31
During recent decades developed countries across the world have confronted significant financial challenges. One area that has come under increasing pressure is the provision of disability benefits to those unable to work full time. Even though there are large differences across countries, the share of working age individuals over the age of 60 who receive disability benefits is greater than 10% in most developed countries in 2010, expenditures on disability programs exceeded 30% of total expenditure on pensions, and surpassed 5% of GDP in several countries. One intuitive cause for this is population ageing, however there is evidence that the number of young individuals with work impeding disabilities is also increasing , thus emphasizing the societal relevance of these programs. Financial pressure is not the only concern. Different studies have shown that disability programs have become substitutes for unemployment benefits or early retirement since they create financial incentives for individuals to withdraw from the labor force prematurely.
In response, many governments have implemented reforms to curb the number of beneficiaries and expenditures on disability programs. This has been done by either tightening eligibility conditions to the different programs, or reducing the benefit amounts. One model for such policies in Europe is the Netherlands, which until the early 2000s was burdened by a substantially larger share of disability recipients than its European counterparts. A series of reforms implemented from 2004 onward sought to reduce government expenditures on disability benefits. The exemplary nature of the Dutch reforms provides an invaluable opportunity to better understand the impact of reducing benefit eligibility on a diverse set of policy relevant outcomes. In the first instance, this proposal will evaluate the causal relationship between disability benefits and labor force participation at the individual level. This will elucidate whether current trends are a direct consequence of the reforms or whether country level statistics are biased by other underlying trends or policies. While such reforms may have succeeded in reducing the number of benefit recipients, this proposal will also seek to evaluate in second instance whether tightening of benefit eligibility has an impact on individual level health. This is of great importance since protecting an individual’s health is a fundamental, yet often forgotten, explicit aim of these programs. The potential shift of financial burden from the social protection to the health system may in the end not be a desirable outcome from a societal perspective.
This project explores the role of disability programs in the Netherlands and disability in a worldwide context to understand how different programs, prevention strategies, or particular causes can be of greater relevance. This includes work on administrative records from the Netherlands but also exploiting studies and settings in other contexts.
In response, many governments have implemented reforms to curb the number of beneficiaries and expenditures on disability programs. This has been done by either tightening eligibility conditions to the different programs, or reducing the benefit amounts. One model for such policies in Europe is the Netherlands, which until the early 2000s was burdened by a substantially larger share of disability recipients than its European counterparts. A series of reforms implemented from 2004 onward sought to reduce government expenditures on disability benefits. The exemplary nature of the Dutch reforms provides an invaluable opportunity to better understand the impact of reducing benefit eligibility on a diverse set of policy relevant outcomes. In the first instance, this proposal will evaluate the causal relationship between disability benefits and labor force participation at the individual level. This will elucidate whether current trends are a direct consequence of the reforms or whether country level statistics are biased by other underlying trends or policies. While such reforms may have succeeded in reducing the number of benefit recipients, this proposal will also seek to evaluate in second instance whether tightening of benefit eligibility has an impact on individual level health. This is of great importance since protecting an individual’s health is a fundamental, yet often forgotten, explicit aim of these programs. The potential shift of financial burden from the social protection to the health system may in the end not be a desirable outcome from a societal perspective.
This project explores the role of disability programs in the Netherlands and disability in a worldwide context to understand how different programs, prevention strategies, or particular causes can be of greater relevance. This includes work on administrative records from the Netherlands but also exploiting studies and settings in other contexts.
In this project we focused in evaluating the pathways to disability and application to disability benefits. For the first part, this project studied different prevention strategies of disability in the health and economic domain. In the case of health, a collaborative research project was developed to explore the role of financial incentives in encouraging individuals to access preventive services for cardiovascular diseases. Since CVDs are a major cause of loss time for work, we studied how financial incentives can be enhanced to encourage individuals to access preventive services. Our findings highlight the role of social networks in increasing the effect of preventive measures. The second collaboration in this new work package involved a project looking at the effect of ARTs on disability life expectancy in South Africa. Leveraging unique data from a longitudinal survey in South Africa we study the role of ART in reducing disability. We find that individuals with well managed HIV have similar health and disability status than healthy individuals. The final collaboration in this strand of work explores the role of social policies such as pensions. Using the same data, we explore the effect of the old age pension in South Africa on health and disability.
For the second part of the study we leveraged individual variation in disability assessments to explore the allocation of disability benefits in the Netherlands. While the original purpose of the package was to explore the effect of disability benefits in the Netherlands, our findings concerning the allocation process raised other questions and deviated the research agenda to understand how allocation was being done and the potential welfare benefits. In general, we find selective allocation of disability benefits based on the applicants’ characteristics that deviate from the original intention of the program. Furthermore, variation in assessments are larger for low income individuals placing them at larger risks to not receive benefits although they might have been eligible with other assessors. The results from this part of the project have resulted in several presentations at local workshops including NETSPAR in the Netherlands and has produced a draft that is currently under submission.
For the second part of the study we leveraged individual variation in disability assessments to explore the allocation of disability benefits in the Netherlands. While the original purpose of the package was to explore the effect of disability benefits in the Netherlands, our findings concerning the allocation process raised other questions and deviated the research agenda to understand how allocation was being done and the potential welfare benefits. In general, we find selective allocation of disability benefits based on the applicants’ characteristics that deviate from the original intention of the program. Furthermore, variation in assessments are larger for low income individuals placing them at larger risks to not receive benefits although they might have been eligible with other assessors. The results from this part of the project have resulted in several presentations at local workshops including NETSPAR in the Netherlands and has produced a draft that is currently under submission.
The findings from this project provide a set of policy implications that are relevant. First, the health system is not sufficient to preventing individuals falling into disability. A greater connection between the social and health structure needs to be achieved to prevent health degradation. Furthermore, our in-depth analysis of mental health suggests that health system may also not be providing similar solutions to all individuals. This emphasizes the need to reflect on the type of care provided or on the context in which those individuals live. Finally, once individuals apply for disability benefits, we find that not all assessments are equivalent. We find that subgroups are more at risk from losing out form the benefits due to the structure of the application system. These findings highlight the need to review the application process for disabilities in a way that subgroups are not particularly at risk.