Financial Incentives in Disability Insurance in the Netherlands

Authors: Vuren, Annemiek; Vuuren, Daniel

Source: De Economist, Volume 155, Number 1, March 2007 , pp. 73-98(26)

Publisher: Springer

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Abstract:

In this article, we assess the impact of financial incentives on the inflow in the public Disability Insurance (DI) scheme in The Netherlands. For this matter, the variation in replacement rates over different sectors is exploited to estimate the probability of DI enrolment over a sample of employees from the Dutch Income Panel (1996-2000). On the basis of these administrative data, we find a point estimate of the elasticity of DI enrolment with respect to the DI wealth rate of 2.5. Simulations indicate that a 5%-point rise in replacement rates in the two first years of DI increases DI enrolment by 6%.

Keywords: disability insurance; financial incentives; moral hazard

Document Type: Research article

DOI: http://dx.doi.org/10.1007/s10645-006-9042-x

Affiliations: 1: Email: djvv@cpb.nl

Publication date: 2007-03-01