TY  - RPRT
        AU  - Ruh, Philippe
AU  - Staubli, Stefan
        TI  - Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design
        PY  - 2018/Jul/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 11667
        UR  - https://www.iza.org/index.php/publications/dp11667
        AB  - Most countries reduce Disability Insurance (DI) benefits for beneficiaries earning above a specified threshold. Such an earnings threshold generates a discontinuous increase in tax liability – a notch – and creates an incentive to keep earnings below the threshold. Exploiting such a notch in Austria, we provide transparent and credible identification of the effect of financial incentives on DI beneficiaries' earnings. Using rich administrative data, we document large and sharp bunching at the earnings threshold. However, the elasticity driving these responses is small. Our estimate suggests that relaxing the earnings threshold reduces fiscal cost only if program entry is very inelastic.
        KW  - disability insurance
KW  - labor supply
KW  - benefit notch
KW  - bunching
        ER  -