asset accumulation and labor force participation of disability insurance applicants abstract this paper provides empirical evidence of the existence of forward looking asset accumulation behavior among disability insurance applicants previously examined only in the theoretical literature using panel data from the rand health and retirement study i show that rejected applicants for social security disability insurance ssdi possess significantly more assets than accepted applicants immediately prior to application and exhibit lower attachment to the labor force these empirical results are consistent with the theoretical prediction in diamond and mirrlees 1978 and golosov and tsyvinski 2006 that certain individuals with high unwillingness to work maximize utility by planning in advance for their future disability insurance application because the existing empirical literature on disability insurance does not account for this intertemporal channel it may underestimate the total work disincentive effect of ssdi

government old age support and labor supply evidence from the old age assistance program many major government programs transfer resources to older people and implicitly or explicitly tax their labor in this paper we shed new light on the labor supply and welfare effects of such programs by investigating the old age assistance program oaa a means tested and state administered pension program created by the social security act of 1935 using newly available census data on the entire us population in 1940 we exploit the large differences in oaa programs across states to estimate the labor supply effects of oaa our estimates imply that oaa reduced the labor force participation rate among men aged 65 74 by 5 8 percentage points nearly half of its 1930 40 decline however both reduced form evidence and an estimated structural model of labor supply imply that the welfare cost to recipients of the high tax rates implicit in oaa s earnings test were small the evidence also suggests that social security could account for at least half of the large decline in late life work from 1940 to 1960

a natural experiment on sick pay cuts sickness absence and labor costs abstract this study estimates the reform effects of a reduction in statutory sick pay levels on sickness absence behavior and labor costs german federal law reduced the legal obligation of german employers to provide 100 continued wage pay for up to six weeks per sickness episode in 1996 statutory sick pay was decreased to 80 of foregone gross wages within the reform s target group private sector employees this measure increased the proportion of employees having zero days of absence between 6 and 8 quantile regression estimates indicate that employees with up to 5 5 annual absence days reduced their days of absence by about 12 extended analyses suggest that in industries that enforced the cut behavioral effects were about twice as large we show that the direct labor cost savings effect stemming from the cut in replacement levels clearly exceeds the indirect effect due to the decrease in absenteeism our calculations about the total decrease in labor costs are very much in line with official data which suggest that total employer provided sick pay decreased by 6 7 or 1 7 billion per year

claim timing and ex post adverse selection many health care treatments are not urgent and may be delayed if patients so choose because insurance coverage is typically determined by the treatment date individuals may have incentives to strategically delay treatments to minimize out of pocket costs the strategic delay of treatment a particular form of moral hazard can be an important source of subsequent adverse selection in which ex ante identical individuals select insurance coverage based on their differing accumulation of previously delayed treatments this article investigates these forces empirically in the context of the missing market for dental insurance using rich claim level data my analysis reveals that approximately 40 of individuals strategically delay dental treatments when incentivized to do so and this flexibility in delaying treatment can explain why the market for dental insurance has largely unraveled more generally the counterfactual analysis suggests features such as open enrolment periods and contracting on pre existing conditions may be helpful tools in overcoming adverse selection in insurance contexts where the timing of uncertainty is not contractible

the consumption response to predictable changes in discretionary income evidence from the repayment of vehicle loans abstract although the life cycle permanent income hypothesis is the primary framework for understanding household consumption and savings decisions only a few studies have used clearly identifiable income changes to test the basic predictions of the model the estimates produced using this empirical strategy have yet to lead to a consensus of beliefs since the results have both favored and rejected the model this paper contributes to this literature by examining the consumption reaction to predictable increases in discretionary income following the final payment of a vehicle loan using data from the consumer expenditure survey the results show that a 10 increase in discretionary income due to a loan repayment leads to a 2 to 3 increase in nondurable consumption additional analysis suggests that these findings may be explained by the presence of borrowing constraints

dynamics of health and labor market risks while there is little doubt that the probability of poor health increases with age and that less healthy people face a more difficult situation on the labor market the precise relationship between facing the risks of health deterioration and labor market instability is not well understood using 12 years of data from the german socio economic panel we study the nature of the relationship between poor health and non employment on a sample of german men aged 30 59 we propose a joint model of health and labor market risks which identifies the mechanism through which poor health contributes to the probability of being jobless and vice versa we find an important role of unobserved heterogeneity and evidence for correlation in the unobservable characteristics determining the two processes the results also show strong persistence in the dynamics of health and labor market risks

how financial incentives induce disability insurance recipients to return to work using a local randomized experiment that arises from a sharp discontinuity in disability insurance di policy in norway we provide transparent and credible identification of how financial incentives induce di recipients to return to work we find that many di recipients have considerable capacity to work that can be effectively induced by providing financial work incentives we further show that providing work incentives to di recipients may both increase their disposable income and reduce program costs our findings also suggest that targeted policies may be the most effective in encouraging di recipients to return to work

the retirement incentive effects of canada s income security programs canada has a large income security system for retirement that provides significant and widely varying disincentives to work at older ages we provide an empirical analysis of the retirement incentives of the canadian income security system using a new administrative database we find that the work disincentives inherent in the canadian income security system have significant impacts on retirement this suggests that program reform can play a role in responses to fiscal pressures we also demonstrate the importance of controlling for lifetime earnings in retirement models specifications without these controls overestimate the effects of the income security

family welfare cultures strong intergenerational correlations in various types of welfare use have fuelled a long standing debate over whether welfare receipt in one generation causes welfare participation in the next generation some claim a causal relationship in welfare receipt across generations has created a culture in which welfare use reinforces itself through the family others argue the determinants of poverty or poor health are correlated across generations so that children s welfare participation is associated with but not caused by parental welfare receipt however there is little empirical evidence to sort out these claims in this paper we investigate the existence and importance of family welfare cultures in the context of norway s disability insurance di system to overcome the challenge of correlated unobservables across generations we take advantage of random assignment of judges to di applicants whose cases are initially denied some appeal judges are systematically more lenient which leads to random variation in the probability a parent will be allowed di using this exogenous variation we find strong evidence that welfare receipt in one generation causes welfare participation in the next generation when a parent is allowed di their adult child s participation over the next five years increases by 6 percentage points this effect grows over time rising to 12 percentage points after ten years while these findings are specific to our setting they serve to highlight that welfare reforms can have long lasting effects on program participation since any original effect on the current generation could be reinforced by changing the participation behavior of their children as well the detailed nature of our data allows us to compare the intergenerational transmission with spillover effects in other networks and to explore mechanisms our findings point to a special link between parents and their children with little impact due to close neighbors di participation we find suggestive evidence that what may change as a result of a parent being allowed di is their children s beliefs about the efficacy of trying to get on to the di program or their attitudes about di participation and its stigma

is addiction rational theory and evidence this paper makes two contributions to the modeling of addiction first we provide new and convincing evidence that smokers are forward looking in their smoking decisions using state excise tax increases that have been legislatively enacted but are not yet effective and monthly data on consumption second we recognize the strong evidence that preferences with respect to smoking are time inconsistent with individuals both not recognizing the true dife culty of quitting and searching for self control devices to help them quit we develop a new model of addictive behavior that takes as its starting point the standard rational addiction model but incorporates time inconsistent preferences this model also exhibits forward looking behavior but it has strikingly different normative implications in this case optimal government policy should depend not only on the externalities that smokers impose on others but also on the internalities imposed by smokers on themselves we estimate that the optimal tax per pack of cigarettes should be at least one dollar higher under our formulation than in the rational addiction case

the real costs of credit access evidence from the payday lending market using geographic differences in the availability of payday loans i estimate the real effects of credit access among low income households payday loans are small high interest rate loans that constitute the marginal source of credit for many high risk borrowers i find no evidence that payday loans alleviate economic hardship to the contrary loan access leads to increased difficulty paying mortgage rent and utilities bills the empirical design isolates variation in loan access that is uninfluenced by lenders location decisions and state regulatory decisions two factors that might otherwise correlate with economic hardship measures further analysis of differences in loan availability over time and across income groups rules out a number of alternative explanations for the estimated effects counter to the view that improving credit access facilitates important expenditures the results suggest that for some low income households the debt service burden imposed by borrowing inhibits their ability to pay important bills copyright 2011 oxford university press

social interaction effects in disability pension participation evidence from plant downsizing we estimate the magnitude of social interaction effects in disability pension participation among older workers in norway the problem of omitted variable bias is addressed using the exposure of an individual s neighbors to plant downsizing events as an instrument for the disability entry rate among the individual s previously employed neighbors our instrumental variable iv estimates suggest that an increase of one percentage point in the participation rate of previously employed neighbors increased the subsequent four year entry rate of older workers by about 0 4 percentage points numerous robustness and specification tests appear to support the validity of the identifying assumption in our iv strategy

the decline in male labor force participation comment in an article in thisjournal parsons 1980a analyzes the doubling in the rate of nonparticipation in the labor force of older men since 1946 using cross sectional data from the national longitudinal survey parnes et al 1970 in an index function model of the labor force participation decision he tests the assertion that the withdrawal of older males is attributable to the rapid expansion of alternatives to work provided by the social security disability insurance ssdi program he reports an elasticity of nonparticipation with respect to the replacement rate of ssdi benefits of 631 and concludes that the recent decline in labor force participation can be largely explained by the increased generosity of social welfare transfers particularly social security disability payments p 130 the magnitude of parsons s estimate and its impact on the public debate over disability transfer policy require careful scrutiny of its basis in section i we describe parsons s econometric model and construction of variables in section ii we provide a critique in section iii we test the robustness of parsons s elasticity estimate by presenting alternative estimates based on corrections and extensions of his basic model section iv concludes

optimal adoption of complementary technologies when a production process requires two extremely complementary inputs conventional wisdom holds that a firm would always upgrade them simultaneously we show however that if upgrading each input involves a fixed cost the firm may upgrade them at different dates asynchronously this insight helps us understand why productivity rises with the age of a plant why investment in structures is more spiked than equipment investment and why plants have spare capacity the bigger point of the paper is that complementarity does not necessarily imply comovementnot even for a single decision maker jel e22 031 p11

parental responses to child support obligations evidence from administrative data abstract we study parental responses to child support obligations using rich administrative data from denmark and variation in the child support formula we estimate that a 1000 dkk 160 increase in a father s obligation is associated with a 273 dkk 45 increase in his payment a higher obligation reduces father child co residence pointing to substitution between financial and non pecuniary investments further obligations increase post separation fertility among remarried fathers but have no impacts on maternal fertility or either parent s labor supply our findings suggest that government efforts to increase child investments through mandates on parents can be complicated by their behavioral responses to them

quasi hyperbolic discounting and retirement abstract some people have self control problems regularly this paper adds endogenous retirement to laibson s quasi hyperbolic discounting savings model quarterly journal of economics 112 1997 443 477 earlier selves think that the deciding self tends to retire too early and may save less to induce later retirement still earlier selves may think the pre retirement self does this too much saving more to induce early retirement the consumption pattern may be different from that with exponential discounting other observational non equivalence includes the impact of changing mandatory retirement rules or work incentives on savings and a possibly negative marginal propensity to consume out of increased future earnings naive agents are briefly considered

does privatisation of vocational rehabilitation improve labour market opportunities evidence from a field experiment in sweden this paper analyses if privatisation of vocational rehabilitation can improve labour market opportunities for individuals on long term sickness absence we use a field experiment performed by the p

the reaction of household consumption to predictable changes in social security taxes the key implication of rational expectations and the basic life cycle permanent income hypothesis that predictable changes in income have no effect on the growth rate of consumption expenditures is examined this implication is important for understanding the effectiveness and optimal timing of fiscal policy the causes and propagation of business cycles and the effects of income fluctuations on the growth rate of the economy using household level consumption data from the consumer expenditure survey whether expenditures on nondurable goods increase contemporaneously with predictable changes in social security tax withholding is tested it is found that households do change their consumption expenditures in response to the predictable fluctuations in income induced by the social security tax system

the rise in the disability rolls and the decline in unemployment between 1984 and 2001 the share of nonelderly adults receiving social security disability insurance income di rose by 60 percent to 5 3 million beneficiaries rapid program growth despite improving aggregate health appears to be explained by reduced screening stringency declining demand for less skilled workers and an unforeseen increase in the earnings replacement rate we estimate that the sum of these forces doubled the labor force exit propensity of displaced high school dropouts after 1984 lowering measured u s unemployment by one half a percentage point steady state calculations augur a further 40 percent increase in the rate of di receipt

disability insurance and unemployment insurance as substitute pathways in this article we estimate the degree of substitution between enrolment into disability insurance di and unemployment insurance ui in the netherlands starting in the 1990s many policy measures aimed at reducing di enrolment and increase labour force participation we quantify whether these policy measures have led to a reduction in hidden unemployment in di a side effect of the reforms may be increased pressure on ui therefore we simultaneously estimate reverse substitution that is hidden disability in ui to this end we employ a sample of firms in the dutch avo database from the period 1993 to 2002 using instrumental variables in a bivariate tobit specification we identify the hidden components in both respective schemes the estimation results indicate that about 3 of all dismissals took place through di which implies that about one quarter of the di enrolments observed in our sample in fact consists of hidden unemployment we find no evidence for reverse substitution of disabled perso

disability insurance benefits and labor supply a critical input for assessing the optimal size of disability insurance programs is the elasticity of labor force participation with respect to the generosity of benefits unfortunately this parameter has been difficult to estimate in the context of the u s disability insurance program since all workers face an identical benefits schedule i surmount this problem by studying the experience of canada which operates two distinct disability insurance programs for quebec and for the rest of canada the latter program raised its benefits by 36 percent in january 1987 whereas benefits in quebec were constant i find a sizable labor supply response to the policy change my central estimates imply an elasticity of labor force nonparticipation with respect to disability insurance benefits of 0 28 0 36

union contracts and the life cycle permanent income hypothesis this paper isolates households in the psid whose heads can be matched to particular long term union contracts with high confidence the author uses use published information on these contracts to construct a household specific measure of expected wage growth he finds that predictable wage movements are significantly correlated with consumption changes contrary to neoclassical consumption theory the author finds that consumption responds more strongly to predictable income declines than to predictable income increases this asymmetry is inconsistent with liquidity constraints and myopia but is qualitatively consistent with models in which preferences exhibit loss aversion copyright 1995 by american economic association

early retirement policy in the presence of competing exit pathways evidence from pension reforms in finland i study the effects of changes in the eligibility age thresholds for unemployment and part time pensions and the effect of tightening medical criteria for disability pension eligibility in finland particular attention is paid to the spillover effects of the pension reforms these pension reforms jointly raised the average age at which workers leave employment by 3 9 months mainly due to a sharp drop in disability pension enrolment from age 58 upwards and a lower incidence of unemployment at younger ages these effects are heterogeneous much of which is attributable to the spillover effects that vary across individuals

moral hazard and sickness insurance abstract we study if the replacement level in the swedish national sickness insurance which replaces foregone earnings due to temporary illnesses affects work absence behavior we use micro data and estimate the effects of a major reform whereby the replacement level during the first 90 days in each absence spell was reduced on work attendance to separate out the effect of the reform from any trend in work absence we distinguish between the implications on the incidence of work absence i e the frequency of spells and the duration of the spells we also use a regression discontinuity approach to estimate the effects on the prevalence of work absence finally we estimate elasticities with respect to the replacement level in the sickness insurance

risk and farm operator labour supply this study uses a large increase in us federal crop insurance subsidies as a natural experiment to identify the importance of risk for farm operator labour supply subsidy increases induced greater crop insurance coverage which in turn reduced farmers financial risks crop insurance participation data are merged with farm level census of agriculture data from 1992 and 1997 to compare how individuals off farm labour supply changed in response to the policy induced change in insurance coverage the empirical approach controls for unobserved heterogeneity and accounts for the censored nature of the data it is found that greater insurance coverage reduces the off farm labour supply of operators who produced at least 100 000 of output and increased the labour supply of small farm operators who produced less than 25 000 of output

the health and earnings of rejected disability insurance applicants applicants for social security disability benefits who fail to pass the medical screening form a natural control group for beneficiaries data drawn from the 1972 and 1978 surveys of the disabled done for the social security administration show that fewer than 50 percent of rejected male applicants work typical earnings of those that do are less than 59 percent of median earnings for other men their age these data cast doubt on recent econometric work that suggests that the disincentive effects of the social security disability program have been substantial copyright 1989 by american economic association

disability earnings income and consumption using longitudinal data for the period 1968 2005 for a sample of male household heads we determine the prevalence of disability during the working years and examine how the extent of disability affects a range of outcomes including earnings income and consumption we have seven main findings first disability rates are high we divide the disabled along two dimensions based on the persistence and severity of their work limiting condition we estimate that a person reaching age 56 has a 53 percent chance of having been disabled at least once during his working years and a 19 percent chance that he has begun a chronic and severe disability second the economic consequences of disability are frequently profound ten years after disability onset a person with a chronic and severe disability on average experiences a 68 percent decline in earnings a 32 percent decline in after tax income a 22 percent decline in food and housing consumption and a 21 percent decline in food consumption third the various economic consequences differ sharply across disability groups the outcome declines for those with a chronic and severe disability are often more than twice as large as those for the average disabled fourth our findings show the partial and incomplete roles that individual savings family support and social insurance play in reducing the consumption drop that follows disability only about half of this most disabled group reports receiving social security disability insurance or supplemental security income fifth we find a noticeable fall in earnings and income prior to the onset of a reported disability consumption also falls somewhat suggesting that future disability is partially but incompletely predictable in the short run sixth time use and detailed consumption data further indicate that disability is associated with a decline in well being seventh the quantities we have estimated combined with elasticities from the literature allow us to examine the optimality of current compensation for the disabled we find that the current compensation for our most disabled group appears to be lower than is optimal

disability insurance benefits and labor supply some additional evidence this article examines the effects of a change in the canada quebec pension plan c qpp disability benefits on the labor supply of older canadian workers i obtain my estimates by exploiting a large increase in benefits that only occurred in the qpp program which only operates in quebec while benefits in the cpp program which operates in the rest of canada were unaffected unlike the existing estimates from the united states as well as earlier canadian obtained by gruber i find that disability benefits are not associated with a large increase in the nonparticipation of older men

disability insurance rejection rates and the labor supply of older workers abstract we investigate the effects of trying to mitigate moral hazard in the disability insurance di program by raising the stringency of the screening process for applicants we do so by studying a dramatic increase in rejection rates for the di program in the late 1970s which varied substantially across the us states we find that each 10 rise in denial rates led to a statistically significant 2 8 fall in labor force non participation among 45 64 year old males we also find that the denial rate increases effectively targeted their incentive effects to more able individuals according to an anthropometric measure of disability

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

disability policy and the labor market evidence from a natural experiment in canada 1998 2006 abstract this paper examines the effect of changes in two key parameters in disability policy a the earnings that disability insurance beneficiaries are allowed to earn without losing their disability benefits and b automatic reinstatement where beneficiaries can have benefits reinstated without re application and re testing for disability determination we examine the effects of these policy changes on the probability of employment for disability beneficiaries as well as the flows onto and off the disability rolls we obtain our estimates using a difference in difference strategy that exploits the unique structure of disability insurance arrangements in canada namely that there are two programs one that covers individuals in the province of quebec and one in the rest of canada our preferred estimates indicate that the introduction of the allowable earnings change increased the propensity of disability beneficiaries to work but we do not find that the earnings exemption had an effect on the flows on to or off the disability rolls in contrast we find that the introduction of the automatic reinstatement policy did not have an effect on any of the outcomes we examine

labor force participation and monetary policy in the wake of the great recession in this paper we provide compelling evidence that cyclical factors account for the bulk of the post 2007 decline in the u s labor force participation rate we then proceed to formulate a stylized new keynesian model in which labor force participation is essentially acyclical during normal times that is in response to small or transitory shocks but drops markedly in the wake of a large and persistent aggregate demand shock finally we show that these considerations can have potentially crucial implications for the design of monetary policy especially under circumstances in which adjustments to the short term interest rate are constrained by the zero lower bound

income and substitution effects of a disability insurance reform abstract disability insurance di systems are widely criticized for their inherent work disincentives this paper evaluates the effects of a swiss di reform that aims to lower di benefits for a group of existing di beneficiaries and introduces an additional level to the di benefit schedule the reform has only modest effects on earnings and employment but increases the disability degree of those threatened by a di benefit decline we estimate bounds on the income and substitution effects by employing the principal stratification framework the income effect is quantitatively important whereas the substitution effect is smaller and has bounds that include zero the evidence suggests that caseworkers helped the insured with low labor market attachment to maintain a full di benefit

beyond revealed preference choice theoretic foundations for behavioral welfare economics we propose a broad generalization of standard choice theoretic welfare economics that encompasses a wide variety of nonstandard behavioral models our approach exploits the coherent aspects of choice that those positive models typically attempt to capture it replaces the standard revealed preference relation with an unambiguous choice relation roughly x is strictly unambiguously chosen over y written xp y iff y is never chosen when x is available under weak assumptions p is acyclic and therefore suitable for welfare analysis it is also the most discerning welfare criterion that never overrules choice the resulting framework generates natural counterparts for the standard tools of applied welfare economics and is easily applied in the context of specific behavioral theories with novel implications though not universally discerning it lends itself to principled refinements

learning self control this article examines how a decision maker who is only partially aware of his temptations learns about them over time in facing temptations individuals use their experience to forecast future self control problems and choose the appropriate level of commitment i demonstrate that rational learning can be perpetually partial and need not result in full sophistication the main result of this article characterizes necessary and sufficient conditions for learning to converge to full sophistication i apply this result to a consumption savings environment in which a decision maker is tempted by present bias and establish a learning theoretic justification for assuming sophistication in this setting an individual who finds himself continuously repudiating his past plans may learn to distrust his future behavior and may do something about it strotz 1955

does disability insurance receipt discourage work using examiner assignment to estimate causal effects of ssdi receipt abstract we present the first causal estimates of the effect of social security disability insurance benefit receipt on labor supply using all program applicants we use administrative data to matc

paycheque receipt and the timing of consumption this article examines the consumption response to monthly paycheque receipt since the amount and arrival date of paycheques are known in advance the receipt of a paycheque does not coincide with the receipt of new information under the basic rational expectations life cycle permanent income hypothesis household consumption should not respond to paycheque arrival using data from the uk s family expenditure survey this article finds that household consumption is excessively sensitive to paycheque receipt the results cannot be explained by any underlying monthly expenditure fluctuations common to all households the presence of liquidity constraints as measured by wealth and age can account for the excess sensitivity results

effects of microcredit and other loans on female empowerment in bangladesh the borrower s gender influences intra household resource allocation this article examines microcredit s effectiveness in empowering women borrowers in rural bangladesh it does so by examining how gender specific borrowing activities influence household expenditures which are either specifically of interest to men or women and by examining the effects of all loans rather than only those provided by microcredit organizations the article uses a quasi experimental design to identify the effects of borrowing by men and women by using an original combination of panel data and instrumental variables on subsamples of the surveyed population it finds that the borrower s gender affects how households allocate their resources to different expenditure items and assets that are valued differently by men and women in all the findings suggest that providing greater credit access to women may improve their household bargaining positions

are high interest rates effective for stopping high inflation some skeptical notes high interest rates are considered an effective toolfor stopping high inflation the case for a policy of high interest rates is developed in terms of a conventional is lm model however among other things the model ignores some central aspects of modern credit markets in particular high interest rates may give rise to nonperforming bank loans thus seriously jeopardizing the effectiveness of the policy examples are developed in which it would be optimal to aim for equilibriums of low rather than high interest rates one of these examples hinges on the existence of nonindexed domestic debt this article looks at the effectiveness and desirability of relatively high interest rates in stabilization programs high interest rates refer to nominal interest rates that would result in unsustainable high real interest rates that is real rates of interest that would cause a state of generalized bankruptcy if maintained for a few months or a year if the program s inflation target were to be achieved the article evolves through a series of examples beginning with the is lm model described in section i despite its simplicity and early vintage the model is still important in discussions of policy the conventional is lm approach which gives strong support to a policy of high interest rates implies that tight money is effective in reducing economic activity and through the phillips curve is also effective in lowering inflation the larger the interest rate the sooner price stability will be achieved section ii questions the relevance of the is lm result on the basis of two observations first we live in a world in which countries are closely linked from a financial point of view therefore high interest rates are likely to signal expectations of high devaluation or inflation second high inflation rates make expected or ex ante real interest rates look much smaller than if the stabilization plan s inflation targets were to be fulfilled consequently banks may continue lending despite high nominal rates with the passage of timne however firms will find themselves in serious financial straits which eventually may result in a state

is there a daily discount rate evidence from the food stamp nutrition cycle abstract quasi hyperbolic discounting predicts impatience over short run tradeoffs i present a direct non laboratory test of this implication using data on the nutritional intake of food stamp recipients caloric intake declines by 10 to 15 percent over the food stamp month implying a significant preference for immediate consumption these findings constitute a rejection of the permanent income hypothesis and are extremely difficult to reconcile with exponential discounting the data support an explanation based on time preference and reject several alternative explanations including highly elastic intertemporal substitution i explore implications for the optimal timing of transfer payments under alternative assumptions about preferences

the economic implications of disability insurance in canada the article empirically estimates the effects of disability pensions provided under the canada quebec pension plans on the labor force participation rates of males aged 45 64 years two data sets are used one consists of pooled cross section annual time series data by province for the years 1975 83 the other consists of observations as of 1985 on 651 males in the specified age group naive estimation results from both sets of data suggest a large negative effect of pension income in the case of the micro data this effect becomes small and statistically nonsignificant when more sophisticated estimation methods are used

liquidity constraints and imperfect information in subprime lending ditions for precisely the population that is most likely to have a difficult time obtaining credit those with low incomes and poor credit histories these consumers who typically cannot qualify for regular bank loans comprise the so called subprime market because the company we study originates subprime loans its loan applications and transaction records provide an unusual win dow into the consumption and borrowing behavior of households that are rationed in primary credit markets moreover we track loan repayments allowing us to analyze the difficulties in lending to the subprime population we begin by documenting the importance of short term liquidity constraints for individuals in our sample we present two pieces of evidence both are based on purchasing behavior and indicate a high sensitivity to cash on hand first we document a dramatic degree of demand seasonality associated with tax rebates overall demand is almost 50 percent higher during tax rebate season than during other parts of the year this seasonal effect varies with household

disability transfers self reported health and the labor force attachment of older men evidence from the historical record we use trends in self reported disability to gauge the impact of the growth of disability transfer programs on the labor force attachment of older working aged men our tabulations suggest that between 1949 and 1987 about half of the 4 9 percentage point drop in the labor force participation of men aged 45 54 and between one quarter and one third of the 19 9 point drop among men aged 55 64 represented a movement of men out of the labor force and onto the rolls of transfer programs targeted at the disabled since the expansion of transfer programs represents only one of the forces behind this movement these figures represent upper bounds on the impact of such programs on work force attachment

the timing of pay abstract there exists large and persistent variation in not only how but when employees are paid a fact unexplained by existing theory this paper develops a simple model of optimal pay timing for firms when workers have self control problems they under save and experience volatile consumption between paychecks thus pay whose delivery matches the timing of workers consumption needs will reduce wage costs the model also explains why pay timing should be regulated as it is in practice although the worker benefits from a timing profile that smoothes her consumption her lack of self control induces her to attempt to undo the arrangement either by renegotiating with her employer or by taking out payday loans regulation of pay timing and consumer borrowing is required to counter these efforts helping the worker help herself

when minority labor migrants meet the welfare state life cycle employment of minority labor migrants who entered norway in the early 1970s diverges from that of natives immigrant employment was nearly complete during early years but declined to 50 by the year 2000 compared to 87 for a native comparison group we find that immigrant employment is particularly sensitive to the business cycle and that economic downturns of the 1980s and 1990s accelerated their labor market exit we trace part of the decline to migrants being overrepresented in shrinking industries but we also identify welfare disincentives that contribute to poor life cycle employment performance of immigrants with many dependent family members

aching to retire the rise in the full retirement age and its impact on the social security disability rolls abstract the social security amendments of 1983 reduced the generosity of social security retired worker benefits in the u s by increasing the program s full retirement age from 65 to 67 and increasing the penalty for claiming benefits at the early retirement age of 62 these changes were phased in gradually so that individuals born in or before 1937 were unaffected and those born in 1960 or later were fully affected no corresponding changes were made to the program s disabled worker benefits and thus the relative generosity of social security disability insurance ssdi benefits increased in this paper we investigate the effect of the amendments on ssdi enrollment by exploiting variation across birth cohorts in the policy induced reduction in the present value of retired worker benefits our findings indicate that the amendments significantly increased ssdi enrollment since 1983 with an additional 0 6 of men and 0 9 of women between the ages of 45 and 64 receiving ssdi benefits in 2005 as a result of the changes our results further indicate that these effects will continue to increase during the next two decades as those fully exposed to the reduction in retirement benefit generosity reach their fifties and early sixties

a kink that makes you sick the effect of sick pay on absence we exploit a regression kink design to estimate the elasticity of the duration of sickness absence with respect to replacement rate elasticity is a central parameter in defining the optimal social insurance scheme compensating for lost earnings due to sickness we use comprehensive administrative data and a kink in the policy rule near the median earnings we find a statistically significant estimate of the elasticity of the order of one

self control and bargaining abstract this paper examines a bargaining game with alternating proposals where sophisticated quasi hyperbolic discounters negotiate over an infinite stream of payoffs in markov perfect equilibrium payoffs are almost always unique and a small advantage in self control can result in a large advantage in payoff in subgame perfect equilibrium a multiplicity of payoffs and delay can arise despite the complete information setting markov perfect equilibria are the best subgame perfect equilibria for the agent with more self control and the worst for the agent with less self control naivete can help a player by increasing their reservation value

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

disability benefits consumption insurance and household labor supply while a mature literature finds that disability insurance di receipt discourages work the welfare implications of these findings depend on two rarely studied economic quantities the full cost of di allowances to taxpayers summing over di transfer payments benefit substitution to or from other transfer programs and induced changes in tax receipts and the value that individuals and families place on receiving benefits in the event of disability we comprehensively assess these missing margins in the context of norway s di system drawing on two strengths of the norwegian environment first norwegian register data allow us to characterize the household impacts and fiscal costs of disability receipt by linking employment taxation benefits receipt and assets at the person and household level second random assignment of di applicants to norwegian judges who differ systematically in their leniency allows us to recover the causal effects of di allowance on individuals at the margin of program entry accounting for the total effect of di allowances on both household labor supply and net payments across all public transfer programs substantially alters our picture of the consumption benefits and fiscal costs of disability receipt while di allowance causes a significant increase in household income and consumption on average it has little impact on income or consumption of married applicants because spousal earnings responses via the added worker effect and benefit substitution entirely offset di benefit payments among those who are allowed relative to those who are denied to develop the welfare implications of these findings we estimate a dynamic model of household behavior that translates employment reapplication and savings decisions into revealed preferences for leisure and consumption we find that household valuation of receipt of di benefits is considerably greater for single and unmarried individuals than for married couples because spousal labor supply substantially buffers household income and consumption in the event of di denial

disability benefit generosity and labor force withdrawal abstract a key component for estimating the optimal size and structure of disability insurance di programs is the elasticity of di claiming with respect to benefit generosity yet in many countries including the united states all workers face identical benefit schedules which are a function of one s labor market history making it difficult to separate the effect of the benefit level from the effect of unobserved preferences for work on individuals claiming decisions to circumvent this problem we exploit exogenous variation in di benefits in austria arising from several reforms to its di and old age pension system in the 1990s and 2000s we use comprehensive administrative social security records data on the universe of austrian workers to compute benefit levels under six different regimes allowing us to identify and precisely estimate the elasticity of di claiming with respect to benefit generosity we find that over this time period a 1 increase in potential di benefits was associated with a 1 2 increase in di claiming

ramsey meets laibson in the neoclassical growth model the neoclassical growth model is modified to include a variable rate of time preference with no commitment ability and log utility the equilibrium features a constant effective rate of time preference and is observationally equivalent to the standard model the extended framework yields testable linkages between the extent of commitment ability and the rates of saving and growth the model also has welfare implications including the optimal design of institutions that facilitate household commitments steady state results are obtained for general concave utility functions and some properties of the transitional dynamics are characterized for isoelastic utility

disability in italian households income poverty and labour market participation this article studies the economic effects of disabled members on italian households with the aim of identifying a suitable target group for welfare policies survey of households income and wealth data for the year 2000 is used preliminary results show significant differences in levels of income and poverty diffusion to the detriment of households with disabled members we propose an exogenous explanation the replacement ratio between disability benefits and expected labour income shows that disability benefits do not compensate the potential incomes of the disabled person and of the possible carer except in households with severe socioeconomic disadvantages we also propose an endogenous explanation applying a logit model we show that the labour market participation of the possible carer is reduced in households with disabled persons in order to increase the income of the households with disabled members policy recommendations include the provision of care services and structural policies to impro

the impact of economic conditions on participation in disability programs evidence from the coal boom and bust abstract we examine the impact of the coal boom of the 1970 s and the coal bust of the 1980 s on disability program participation these shocks provide clear evidence that as the value of labor market participation increases disability program participation falls for the disability insurance program the elasticity of payments with respect to local earnings is between 0 3 and 0 4 and for supplemental security income the elasticity is between 0 4 and 0 7 consistent with a model where qualifying for disability programs is costly the relationship between economic conditions and program participation is much stronger for permanent than for transitory economic shocks

screening disability insurance applications this paper investigates the effects of stricter screening of disability insurance applications a large scale experiment was setup where in two of the 26 dutch regions case workers of the disability insurance administration were instructed to screen applications more stringently the empirical results show that stricter screening reduces long term sickness absenteeism and disability insurance applications we find evidence for direct effects of stricter screening on work resumption during the period of sickness absence and for self screening by potential disability insurance applicants stricter screening seems to improve targeting efficiency without inducing negative spillover effects to the inflow into unemployment insurance the costs of stricter screening are only a small fraction of the monetary benefits

the impact of stricter criteria for disability insurance on labor force participation this paper studies the effect of a large scale policy change in the austrian disability insurance program which tightened eligibility criteria for men above a certain age using administrative data on the universe of austrian private sector employees the results of difference in difference regressions suggest a substantial and statistically significant decline in disability enrollment of 6 to 7 4 percentage points and an increase in employment of 1 6 to 3 4 percentage points the policy change had important spillover effects into the unemployment and sickness insurance program specifically the share of individuals receiving unemployment benefits increased by 3 5 to 3 9 percentage points and the share receiving sickness insurance benefits by roughly 0 7 percentage points

disability screening and labor supply evidence from south africa yet research that examines the poverty reduction and labor supply effects of disability programs has taken place exclu sively in developed countries with relatively low unemployment and high labor force participa tion rates in developing countries with high unemployment rates the disincentive effect of cash transfers on labor supply has often been assumed to be economically insignificant anne case and angus deaton 1998 in this paper i provide initial evidence on and draw attention to the effect of the south africa disability grant dg program on labor supply in the context of a policy change in disability screening i use a difference in differences estimator to assess the effect of a change toward a less intensive dis ability screening on labor force nonparticipation for older individuals if screening for disability benefit programs were perfect the supply of disability benefits would be independent of labor supply decisions and only those unable to work due to health con ditions would receive benefits however the dis ability screening process is imperfect because it is in practice difficult to determine whether a person is able to work which is the typical test of eligibility for disability benefit programs recent evidence suggests that the work disincen tive effects of disability benefits are expected to

the employment effects of terminating disability benefits abstract few social security disability insurance di beneficiaries return to the labor force making it hard to assess their likely employment in the absence of benefits using administrative data i examine the employment of individuals who lost di eligibility after the 1996 removal of drug and alcohol addictions as qualifying conditions approximately 22 started working at levels that would have disqualified them for di an employment response that is large relative to their work histories those who received di for 2 3 years had the largest response suggesting that a period of public assistance may maximize the employment of some disabled individuals

the married widow marriage penalties matter marriage penalties are a controversial feature of many government policies empirical evidence of their behavioral effects is quite mixed which is surprising because economic theory predicts that they should have an impact on the headship decision we investigate the removal of marriage penalties from the surviving spouse pensions of the canadian public pension system in the 1980s these reforms provide a simple and transparent source of identification our results indicate that marriage penalties can have large and persistent effects on marriage decisions we also present evidence suggesting that it is individuals with characteristics correlated with greater wealth who respond to the penalties jel j1 h2

temporary disability insurance and labor supply evidence from a natural experiment most developed countries have compulsory insurance programs for temporary disability that is cash benefits for non work related sickness despite the economic significance of these programs little is known about their effects on work absenteeism or labor supply we exploit a policy reform that consisted of the abolishment of a waiting day together with an increase of cash benefits for short sick leaves we find that the total number of days of sickness absence was reduced by the reform which is likely due to the fact that the abolishment of the waiting period made it less costly for workers to be absent for short periods

the effects of expanding the generosity of the statutory sickness insurance system summary this article evaluates an expansion of employer mandated sick leave from 80 to 100 of forgone gross wages in germany we employ and compare parametric difference in difference did matching did and mixed approaches overall workplace absences increased by at least 10 or 1 day per worker per year we show that taking partial compliance into account increases coefficient estimates further heterogeneity in response behavior was of great importance there is no evidence that the increase in sick leave improved employee health a finding that supports a shirking explanation finally we provide evidence on potential labor market adjustments to the reform copyright 2013 john wiley sons ltd

3rd of tha month do social security recipients smooth consumption between checks this paper examines the response of consumption expenditures to the monthly receipt of social security checks since the amount and arrival date of these checks are known to the recipients the basic life cycle permanent income hypothesis lcpih predicts that consumption should not respond to the receipt of these checks using daily diary data from the consumer expenditure survey this paper finds evidence that both the dollar amount and probability of expenditures increase immediately following the receipt of this check most relevant to testing the lcpih categories of instantaneous consumption expenditure such as food away from home increase on the check arrival date the response is found primarily amongst households for whom social security is the primary source of income however the magnitude of the estimated responses are relatively small and do not suggest that the utility losses are large from this non smoothing behavior this abstract was borrowed from another version of this item

adjustment cost and incentives to work evidence from a disability insurance program abstract how important is adjustment cost for individuals who face a change in work incentives induced by a policy change i provide the first estimate of adjustment cost in the context of a disability insurance di program by exploiting a policy change that increased work incentives by increasing the exemption threshold i use bunching at the thresholds to estimate adjustment cost and earnings elasticity the estimates of adjustment cost are quite sizeable and heterogeneous the estimates of earnings elasticity from both static and dynamic models are larger than the elasticity estimated with no adjustment cost suggesting that adjustment cost attenuates the responses to work incentives policies designed to increase labor supply will work if the work incentives are large enough to offset the adjustment cost accounting for adjustment cost then might explain the disparate findings on the effects of an increase in work incentives on the labor supply of beneficiaries of di programs