Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111540
Authors: 
Bagaria, Nitika
Petrongolo, Barbara
Van Reenen, John
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers 9089
Abstract: 
Disability rolls have escalated in developed nations over the last 40 years. The UK, however, stands out because the numbers on these benefits stopped rising when a welfare reform was introduced that integrated disability benefits with unemployment insurance (UI). This policy reform improved job information and sharpened bureaucratic incentives to find jobs for the disabled (relative to those on UI). We exploit the fact that the policy was rolled-out quasi-randomly across geographical areas. In the long-run the policy improved the outflows from disability benefits by 6% and had an (insignificant) 1% increase in unemployment outflows. This is consistent with a model where information helps both groups, but bureaucrats were given incentives to shift effort towards helping the disabled find jobs and away from helping the unemployed. Interestingly, in the short-run the policy had a negative impact for both groups, suggesting important disruption effects. We estimate that it takes about six years for the estimated benefits of the reform to exceed its costs, which is beyond the time horizon of most policy-makers.
Subjects: 
incentives
public sector
unemployment benefits
performance standards
JEL: 
H51
I13
J18
Document Type: 
Working Paper

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