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

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

corrigendum to feebates rebates and gas guzzler taxes a study of incentives for increased fuel economy energy policy 33 2005 757 775

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

why have uk disability benefit rolls grown so much abstract over the last 30 years many countries including the uk have seen a dramatic rise in the share of the working age population receiving sickness and disability benefits hereafter disability benefits this is despite health levels that are generally thought to be slowly improving this paper describes the time path of uk disability benefit rolls and explores the existing uk literature together with literature from the usa in search of potential explanations for it since the early 1990s despite a number of detailed descriptive studies surprisingly little attention has been paid to quantifying the importance of the different factors believed to be driving the uk benefit roll growth this is all the more surprising given the continued growth and the level of policy attention recently and currently devoted to disability benefits in the uk

disability transfers and the work decision of older men the potential causal relationship between the availability and generosity of disability transfers and the nonparticipation rates of older men is often asserted and much studied parsons 1980 haveman and wolfe 1984 leonard 1986 however estimates of the magnitude of this linkage vary widely the growth in transfer availability and generosity has been credited with from 30 to 100 percent of the significant post 1960 fall in older male participation rates the disparity in these research results stems primarily from 1 alternative sources of data that differentially constrain estimation of relevant expected wage and transfer incomes 2 specifications that are unable to distinguish income transfer from labor market effects and 3 reliance on measures of health status that are endogenous to the work leisure decision this study seeks to narrow the range of estimates by addressing each of these issues our utility maximization model of work status choice assumes that workers who differ in health status choose between the mutually exclusive options of working at the wage offered for their characteristics and accepting public or private disability transfers because the income flows in the two options are censored they are estimated using switching regression techniques as expectations conditional on exogenous individual characteristics hence accounting for the potentially endogenous process that separates wage earners from transfer recipients the marginal utilities of income from the two sources are allowed to differ because of stigma effects in the estimation we adjust the choice based nature of our sample employ longitudinal earnings data to measure expected changes in as distinct from the expected level of income in the two options and use a separately estimated latent health status measure largely purged of its endogeneity with the participation decision

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

comparing flexibility mechanisms for fuel economy standards since 1975 the corporate average fuel economy cafe program has been the main policy tool in the us for coping with the problems of increasing fuel consumption and dependence on imported oil the program mandates average fuel economy requirements for the new vehicle sales of each manufacturer s fleet with separate standards for cars and light trucks the fact that each manufacturer must on its own meet the standards means that the incentives to improve fuel economy are different across manufacturers and vehicle types although the problems associated with fuel consumption do not make such distinctions this paper evaluates different mechanisms to offer automakers the flexibility of joint compliance with nationwide fuel economy goals tradable cafe credits feebates output rebated fees and tradable credits with banking the policies are compared according to the short and long run economic incentives as well as to issues of transparency implementation administrative and transaction costs and uncertainty

international experience on incentive program in support of fuel economy standards and labelling for motor vehicle a comprehensive review abstract the road transports especially the motor vehicles play a significant role in increment of energy consumption in the transportation sector however the harmful greenhouse gas ghg emissions from such vehicles which are the main causes of global warming have been increased as well one of the effective solutions to reduce the growth rate of energy consumption is the implementation of fuel economy standard and label other countries experiences indicate that the program is very beneficial for society environment and government the hierarchy of the program consists of the test procedure fuel economy standards fuel economy label and incentive program as a peak of the program reviews of the fuel economy standard can be found in many references however a few papers deal with the incentive program specifically therefore this paper aims to give a review on the implementation of the incentive program globally in support of fuel economy standard and label for the motor vehicles finally as the incentive program is necessary to support fuel economy standard and label it should be applied to the motor vehicles as soon as possible

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

disability cash transfers in the context of poverty and unemployment the case of south africa summary south africa s disability grant dg program has been criticized for its poor administration and the dependency culture it promotes this paper assesses the program s targeting effectiveness and its effects on labor supply using disability self reports and standard measures of economic well being the results suggest that dg s inclusion errors are relatively limited but exclusion errors are substantial and serious the paper also shows that increased leniency in disability screening policy in the gauteng province in the early 2000s does not appear to have altered labor market behaviors relative to northern cape a province where there was no change in policy

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 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

self screening in targeted public transfer programs the self screening properties of initial eligibility determination a mechanism often under the control of the administrators of targeted transfer programs are derived and the use of this mechanism in the social security disability insurance system is explored empirically an increase in the rigor of initial eligibility screening may discourage potential applicants because they are unaware of appeal prospects and because the eligibility decision delay is lengthened as denied applicants are forced to appeal their claims in the disability program a 10 percent increase in the initial denial rate induces a 4 percent decrease in applications self selection is nonperverse

workers compensation moral hazard and the composition of workplace injuries this paper provides evidence that workers compensation insurance wc affects not only the occurrence but also the composition of reported injuries in our theoretical approach wc is the source of two interrelated moral hazard problems underprovision of accident preventing efforts by the insured worker ex ante moral hazard and false reporting of injuries ex post moral hazard our model predicts that under certain assumptions the impact of wc benefits is stronger on the probability of reporting a difficult to diagnose injury than on the probability of reporting an injury that is easy to diagnose panel data on 9 800 workers in the quebec construction industry over each month of the period 1977 86 combining administrative data from the quebec construction board with data from the quebec workers compensation board are used for the estimates the parameters of the model are estimated using a threealternative logit kernel hybrid multinomial probit mnp framework with individual random effects our results confirm our theoretical pre

cluster sample methods in applied econometrics inference methods that recognize the clustering of individual observations have been available for more than 25 years brent moulton 1990 caught the attention of economists when he demonstrated the serious biases that can result in estimating the effects of aggregate explanatory variables on individual specific response variables the source of the downward bias in the usual ordinary least squares ols standard errors is the presence of an unobserved state level effect in the error term more recently john pepper 2002 showed how accounting for multi level clustering can have dramatic effects on t statistics while adjusting for clustering is much more common than it was 10 years ago inference methods robust to cluster correlation are not used routinely across all relevant settings in this paper i provide an overview of applications of cluster sample methods both to cluster samples and to panel data sets

the liquidity effect for open market operations abstract the liquidity effect is the negative relationship between the supply of federal funds and the overnight federal funds rate deviations of the federal funds rate from its target can be interpreted as demand innovations for federal funds permanent adjustments to demand are modeled as an unobserved component and estimated using the kalman filter to identify liquidity effects the demand based approach for identifying the liquidity effect contrasts previous work which concentrates on errors forecasting the supply of federal funds this paper finds a liquidity effect several times larger than that from previous studies indicating the market for federal funds is less liquid than previously thought the effect of a 1 billion increase in open market operations over a 1 week period is a decrease of the federal funds rate by about 12 basis 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

information costs and incentives to shirk disability compensation of air traffic controllers it has become fashionable in recent years to level charges of abuse at a variety of social welfare programs unemployment insurance and certain disability compensation programs come to mind as targets of a barrage of criticism based on inherent work disincentives and sloppy administration no doubt there is an element of truth in many of the criticisms however it is one thing to allege the existence of disincentives and quite another to predict the ways in which they will alter observable behavior this paper attempts the latter task numerous authors have noted that the incentives imbedded in any contract are a function of the contractual provisions and enforcement by its very nature a contract governing exchange between two parties constrains their behavior each contractual provision or restriction attempts to limit the responses of both parties however if the restrictions are not perfectly enforced the constraints are not binding which lowers the costs of contractual violations depending upon the type of contract these violations may be labeled default cheating shirking fraud negligence or moral hazard as a case in point consider the analysis by armen alchian and harold demsetz 1972 of the possibility that individuals might shirk contractual responsibilities if benefits exceeded the costs recall that the theory of shirking was originally couched in terms of a utility maximizing employee s laborleisure tradeoff labor time yields a pecuniary reward in the form of income leisure may be thought of as its own reward or as the time devoted to the individual s other desired pursuits given a time constraint an individual will allocate his labor to equate the gains from income with the gains from leisure at the margin if labor rewards are not perfectly correlated with productive effort then the incentive to produce is diminished shirking results if shirking could be costlessly detected neither party to a contract would have an incentive to shirk since the full costs of shirking could be brought to bear on the guilty party through renegotiations of the terms of trade however if detecting shirking through some monitoring mechanism is costly the guilty party will not generally be forced to bear the full costs of his behavior monitoring will only be undertaken so long as the marginal gains from reduced shirking equal or exceed the marginal costs of detection less than perfect monitoring implies some shirking incentives remain strickly speaking shirking may be defined as the act of seeking to avoid performance of contractual duty although alchian and demsetz developed the theory to explain organizations of employer employee relationships it is clear that it can be applied to any contract their results are now well known contractual violations are an increas university of delaware and purdue university respectively we are indebted to the carthage foundation and the krannert graduate school at purdue university for financial support we thank numerous colleagues at the university of delaware and purdue university for intellectual support in particular thanks must go to jack barron james chelius robert clower and an anonymous referee for their helpful comments on earlier drafts while much of the data used for testing came from owcp the faa and lengthy interviews with individuals in the air traffic control industry none of these groups encouraged or funded this study the views expressed here are solely our own the individual still adjusts at his labor leisure margin positive detection costs imply that each person will be induced to take more leisure because the effect of relaxing on his realized reward rate of substitution between output and leisure will be less than the effect on the true rate of substitution his realized cost of leisure will fall more than the true cost of leisure so he buys more leisure i e more nonpecuniary reward alchian and demsetz p 780

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