Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 2008:3: The Employment Effect of Stricter Rules for Eligibility for DI: Evidence from a Natural Experiment in Sweden

Anders Karlström (), Mårten Palme () and Ingemar Svensson ()
Additional contact information
Anders Karlström: Systems Analysis and Economics, Royal Institute of Technology, Postal: Systems Analysis and Economics, Royal Institute of Technology, S-100 44 Stockholm, Sweden
Mårten Palme: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
Ingemar Svensson: Social Insurance Agency, Postal: Social Insurance Agency, S-103 51 Stockholm, Sweden

Abstract: We study the effect of a reform of the Swedish disability insurance (DI) program whereby the special eligibility rules for workers in the age group 60 to 64 were abolished. First, we use a differences-in-differences approach to study changes in the disability take-up as compared to the age group 55 to 59. Then, we use a similar approach to study to what extent the employment effect of the reform is "crowded out" by an increase in the utilization of the sickpay insurance (SI) and/or the unemployment insurance (UI). In an extended analysis, we study the effect of firm closure on employment and the utilization of different labor market insurance programs in different age groups before and after the reform.

Keywords: Disability Insurance; Early Retirement

JEL-codes: H53; H55; H59; J21; J26

33 pages, April 11, 2008

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