The labor market effects of disability benefit loss
29 September 2023
This paper uses a linked database of data provided by the Hungarian State Treasury, the National Health Insurance Fund, the Educational Authority, the National Tax and Customs Administration, the Ministry of Economic Development and cleaned by the Databank of the Institute of Economics, Centre for Economic and Regional Studies. [...] As a consequence of the two subsequent reforms, as well as favorable demographic and economic trends, the share of beneficiaries decreased to 4% of the active population and the cost of DI benefits decreased to below 1% of GDP by 2017, one of the lowest values in Europe. [...] In order for our estimates to represent the causal impact of being subject to the reassess- ment on the labor market outcomes of the treatment group, the control group must represent a valid counterfactual for the evolution of the treatment group’s labor market outcomes. [...] Third, the month-specific estimates of the difference in labor market outcomes between the control and treatment group presented in Figure 2 also show that all outcomes move to- gether in the two groups prior to the reform, which also suggests that the outcomes of the control group post-reform are a good counterfactual for the outcomes of the treatment group. [...] We exclude women from the analysis of the impact of the reform because due to an early retirement option available for women only, the labor force outcomes 17 of the control and treatment group may evolve differently, as the early retirement option is more likely to be available in the (older) control group.