Hidden Unemployment in Disability Insurance

Pierre W. C. Koning · Daniël van Vuuren

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Retirement, Disability, and Employment Labor Law and Work Dynamics Labor market dynamics and wage inequality

Abstract

Abstract. We estimate the fraction of hidden unemployment in the disability insurance (DI) inflow rate on the basis of a longitudinal administrative data set of Dutch employers for the period 1994–2003. This fraction can be identified by imposing so‐called exclusion restrictions on variables that are thought to impact the layoff rate but not disability risk. We find that the fraction of hidden unemployment in DI inflow amounts to 11 per cent. This implies that 2.6 per cent of all layoffs took place via the DI scheme. In addition, we find that this share has declined substantially over time, suggesting that various policy measures taken have been effective.

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References

2001Econometric Analysis of Cross Section and Panel Data 2003The Rise in the Disability Rolls and the Decline in Unemployment 1984Chapter 22 Panel data 1992Trimmed Lad and Least Squares Estimation of Truncated and Censored Regression Models with Fixed Effects 2002Labor Supply Effects of Social Insurance 1999Retirement, financial incentives and health 1992Economic Aspects of Disability Behavior 1997Disability retirement and unemployment - substitute pathways for labour force exit? An empirical test for the case of Germany

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