P.W.C. Koning

Disability insurance and unemployment insurance as substitute pathways

In this article, we estimate the degree of substitution between enrolment into Disability Insurance (DI) and Unemployment Insurance (UI) in the Netherlands. Starting in the 1990s many policy measures aimed at reducing DI enrolment, and increase labour force participation. We quantify whether these policy measures have led to a reduction in hidden unemployment in DI. A side effect of the reforms may be increased pressure on UI. Therefore, we simultaneously estimate reverse substitution, that is, hidden disability in UI. To this end, we employ a sample of firms in the Dutch AVO database from the period 1993 to 2002. Using instrumental variables in a bivariate Tobit specification, we identify the hidden components in both respective schemes. The estimation results indicate that about 3% of all dismissals took place through DI, which implies that about one quarter of the DI enrolments observed in our sample in fact consists of hidden unemployment. We find no evidence for reverse substitution of disabled persons ending up in UI.

Hidden Unemployment in Disability Insurance

In this paper, we construct and estimate a (semi-) structural model, so as to uncover the fraction of hidden unemployment in the Disability Insurance (DI) enrolment rate. For this purpose, we use longitudinal administrative data of Dutch employers for 1994-2003. We find the (average) fraction of hidden unemployment in DI enrolment to amount to about 11%. This corresponds to 2.6% of the `true? unemployment insurance (UI) enrolment rate of employers. Over the years, we observe a strong decrease in this fraction, from 5.4% in 1995, to 0.7% in 2003. In addition, our estimates suggest that most of correlation that is observed between the UI and DI enrolment rates can be explained by substitution effects, and not by `true? correlation between the schemes that is exogenous to the firm.

Do Financial Bonuses Reduce Employee Absenteeism? Evidence from a Lottery

This paper investigates the effectiveness of a lottery-based bonus reward system in reducing employee absenteeism. Starting in June 2002, a Dutch manufacturing firm held a monthly lottery for workers who had taken no sick leave in the previous three months and had not previously won the lottery. In a given lottery, each of seven contestants whose names were randomly drawn received 75 Euros. The authors find statistically significant differences in absence patterns across groups of workers with different eligibility statuses depending on their attendance records and whether they had previously won. One finding is that absenteeism rose among workers who, having won already, were ineligible for further participation. Nevertheless, and although the reduction in firm-wide absence associated with the lottery drifted from 2.4 percentage points to 1.1 percentage points after seven months, the authors conclude that the lottery was of net benefit to the firm.

The Effect of Childhood Conduct Disorder on Human Capital

This paper estimates the longer-term effects of childhood conduct disorder on human capital accumulation and violent and criminal behavior later in life using data of Australian twins. We measure conduct disorder with a rich set of indicators based on diagnostic criteria from psychiatry. Using ordinary least squares and twin fixed effects estimation approaches, we find that early-age (pre-18) conduct disorder problems significantly affect both human capital accumulation and violent and criminal behavior over the life course. In addition, we find that conduct disorder is more deleterious if these behaviors occur earlier in life.

Semi‐Nonparametric Estimation of an Equilibrium Search Model

We specify and estimate an equilibrium job search model with productivity differences across labor market segments The model allows for two types of unemployment: frictional unemployment due to search frictions and structural unemployment due to wage floors Wage floors exist because of high unemployment benefits or binding minimum wages The productivity distribution is estimated semi-nonparametrically along the lines of Gallant-Nychka using Hermite series approximation We decompose the total unemployment rate and we examine the effect of changes in the minimum wage

Employee Health and Employer Incentives

In the past two decades the OECD has regularly voiced concern about the labor market exclusion of people with disabilities and about the cost of disability insurance programs. This paper examines whether the fundamental disability insurance reforms that were implemented in the Netherlands have helped or hindered employment opportunities of workers with health problems or disability. An important component of the Dutch reforms was to enhance employer incentives, which was done by making them responsible for paying sickness benefits and by strengthening their sickness monitoring obligations. These employer incentives may stimulate preventive and reintegration activities by firms, thereby improving the employment opportunities of disabled workers. However, the reforms also impose substantial costs on employers when an employee gets sick and may therefore reduce employment opportunities of disabled workers. We use data from the Dutch Labor Force Survey and rich administrative data from hospital admission records, social security records, and the municipality registers containing demographic information to examine whether the disability reforms have in fact improved the economic situation for the disabled. On balance, we conclude that the DI reforms implemented by the Dutch government have mainly protected those who already have a job, and may have inadvertently reduced the hiring opportunities of people with a disability.

Self-selection and the power of incentive schemes: an experimental study

We examine how self-selection of workers depends on the power of incentive schemes and how it affects team performance if the power of the incentive schemes is increased. In a laboratory experiment, we let subjects choose between (low-powered) team incentives and (high-powered) individual incentives. We observe that subjects exhibiting high trust or reciprocity in the trust game are more likely to choose team incentives. When exposed to individual incentives, subjects who chose team incentives perform worse if both the unobservable interdependency between their efforts and their incentive to cooperate under team incentives are high.

Employers Opting Out of Public Disability Insurance: Selection or Incentive Effects?

This paper analyzes selection and incentive effects of opting out from public to private insurance on employer Disability Insurance (DI) inflow rates. We use administrative information on DI benefit costs and opting-out decisions of a balanced panel of about 140,000 employers that are observed between 2007 and 2011. We argue that the opting-out decision of employers was driven by current DI enrolment and anticipation effects that resulted from short-term expectations on DI costs. In particular, employers opted out when this was most rewarding for them in reducing DI premium rates. When controlling for these effects, our main finding is that there are no incentive effects due to opting out. Thus, publicly and privately insured employers show similar DI inflow rates.

Making Work Pay for the Indebted: The Effect of Debt Services on the Exit Rates of Unemployed Individuals

This paper investigates the effectiveness of an intervention that was targeted at a specific group of Dutch Social Assistance (SA) recipients with debt problems. With a large share of the income gains of work resumption were transferred to the creditors, these individuals experienced a strong a priori disincentive to resume formal work. The direct aims of this intervention were therefore twofold: the restructuring of personal debts and the prevention of new debt problems to arise. We use the timing-of-events method to identify the effects of debt programs on SA spells. Our key finding is that the provision of debt services substantially increased the exit out of the SA schemes, but this was mainly due to exits out of the labor force. This suggests individuals perceived or experienced program as unpleasant and opted to exit without work. At the same time, the debts program offer increased the exit rate for targeted individuals that did not show up, probably due to increased monitoring and sanction activities.

Anticipated and Unanticipated Incentives of Disability Insurance Experience Rating: The Case of The Netherlands

Abstract Objectives: This paper examines and discusses the effects of experience rating on the flow into disability insurance in the Netherlands. A special focus is given to the distinction between (and importance of) anticipated and unanticipated effects of experience rating. Methods: We use longitudinal administrative firm data from the Dutch social benefit administration. The data set covers employers from 2000 to 2002. To estimate the anticipated effects of experience rating, we take advantage of the fact that the premium-setting system was incomplete — that is, there is no (further) incentive to reduce disability insurance costs if a maximum premium is reached. Unanticipated effects are uncovered by comparing employers that are hit by premium increases (ie the ‘treatment’ group) with those who are not (ie the control group), while controlling for employer fixed effects. Results: There is only weak evidence for the anticipated effects of incentives. This contrasts with substantial findings on the unanticipated impact of experience rating. Conclusions: It appears that the decision of employers to increase preventive activities is mainly an issue of being aware of the experience-rating incentive. When taking a broader perspective, however, evidence suggests that the enhanced incentives have also led to an increased flow into unemployment insurance and other benefit schemes.