From the onset of illness to potential recovery : Empirical economic analysis of health, disability and work

Prudon, Roger (2024) From the onset of illness to potential recovery : Empirical economic analysis of health, disability and work. PhD thesis, Vrije Universiteit Amsterdam.

Abstract

Despite a series of reforms between 1996 and 2006 aimed at reducing the inflow into disability insurance in the Netherlands, a substantial share (7%) of the Dutch labor force still receives disability benefits. To gain insights into which groups are most at risk of entering DI, what measures can be taken to prevent this, and how to support them to return to work, this dissertation consists of four chapters that empirically analyse the process from the onset of health problems, through the DI application until the potential recovery of DI recipients in the Netherlands. All chapters of this thesis confirm that while experiencing health issues might be a necessary condition for applying for DI, it is certainly not a sufficient condition to explain differentials in the inflow into DI or work resumption across groups. Even though DI inflow rates in the Netherlands have been reduced by a number of drastic reforms, contextual factors (also non-health related) still matter substantially for both the inflow and the potential outflow out of the DI system. The adequate and timely provision of treatments in the sickness period, the commitment of employers to provide preventative and reintegration activities, labor market prospects, and benefit conditions of the DI benefit scheme itself all make a difference when it comes to the application for and receipt of DI benefits and (partial) work resumption. In terms of targeting, this does not imply that “wrong” (relatively healthy) individuals end up receiving DI in the current system. Groups with higher DI application risks due to these contextual factors exhibit very similar health trajectories leading up to their DI application, compared to groups with lower DI application risks. These contextual factors affect individuals across the entire health spectrum. For example, a DI applicant with a temporary contract might be deemed fully and permanently disabled, while this individual might not have had to apply for DI at all if they had a permanent contract. Improvements of the DI system thus also have the potential to affect a large share of the individuals who might apply for DI. From a policy perspective, this suggests that there is still room for improvements in the design and implementation of the health care and DI systems in order to retain people in the workforce and reduce the number of DI recipients. The analysis in this dissertation has shown that more stringent screening and increased employer incentives have been effective tools. However, the analyses have also shown that despite these tools being in place, a weak labor market attachment can still result in a substantial DI risk. This can be seen in the elevated risks for workers with temporary contracts and UI recipients, but also in the larger impacts of waiting time for mental health treatments on individuals with a migration background and lower educational attainment. Interventions aimed at improving labor market attachment might thus also be effective in reducing DI inflow. Lastly, there still exist considerable disincentives to return to the workforce once DI recipients recover. It should become more favourable to return to work for DI recipients, to ensure that disability benefit receipt becomes a lay-over station instead of an end station.