Working Paper: CEPR ID: DP10643
Authors: Nitika Bagaria; Barbara Petrongolo; John Van Reenen
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.
Keywords: incentives; performance standards; public sector; unemployment benefits
JEL Codes: H51; I13; J18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Jobcentre Plus policy (J68) | outflows from disability benefits (H53) |
| Jobcentre Plus policy (J68) | outflows from unemployment benefits (J65) |
| Jobcentre Plus policy (J68) | short-term disruption effects on both groups (F69) |
| Jobcentre Plus policy (J68) | long-term benefits exceeding costs (H43) |