Centre for Economic Performance, LSE
London WC2A 2AE
NBER Working Papers and Publications
|May 2015||Can helping the sick hurt the able? Incentives, information and disruption in a disability-related welfare reform|
with Barbara Petrongolo, John Van Reenen: w21163
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 ...