Decomposing Employment Trends of Disabled Workers

Abstract

This paper estimates Age-Period-Cohort models on employment rates of Dutch Disability Insurance (DI) applicants. We find that the substantial decrease in employment between 1999 and 2013 is explained by year-of-application cohort effects and that period effects are negligible. In turn, application cohort effects partly stem from increasing shares of applicants without permanent contracts. Changes in application cohort effects are largely confined to the years following two DI reforms that increased self-screening among workers. We next analyze changes in employment rates of awarded and rejected applicants and follow a Difference-in-Differences approach. Assuming common compositional cohort effects, we infer negligible effects of changes in benefit conditions.