Working Paper: NBER ID: w21163
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 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: Disability benefits; Welfare reform; Jobcentre Plus; Bureaucratic incentives; Unemployment insurance
JEL Codes: H53; I13; I38; J14; J18; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| JCPlus policy (D78) | decrease in unemployment outflows (J68) |
| JCPlus policy (D78) | long-run positive effect on disability outflows (J65) |
| initial disruption effect (C69) | decline in outflows from both disability and unemployment benefits (J65) |
| initial disruption effect (C69) | more pronounced decline in unemployment outflows (J69) |
| time (C41) | negative impact on unemployment outflows ceases to be significant (J65) |
| JCPlus policy (D78) | shift in bureaucratic efforts towards disabled claimants (J68) |
| time (C41) | benefits of reform outweigh costs (D61) |