Seminar: Intergenerational Spillovers in Disability Insurance

Time: 13.00-14.00 hours
Location: CPB-office, Bezuidenhoutseweg 30, The Hague, room 1 - V1001

Presentation: Anne Gielen (EUR)

Language: English

Registration: Please register here

Abstract subject:
Does participation in a social program by a parent influence their child's use of public assistance, human capital investments, future labor market, and marriage outcomes? From a policy perspective, what a child learns from his or her parents about employment relative to government support could matter for the financial stability of a variety of social insurance and safety net programs. However, estimating a causal effect is difficult due to parent's nonrandom participation. In this paper we exploit a disability insurance (DI) reform in the Netherlands which tightened eligibility criteria and reduced the generosity of the program. The key to our regression discontinuity design is that the reform applied to younger cohorts, while older cohorts were exempted from the new rules. We find strong evidence that children of parents who were pushed out of DI or had their benefits reduced are affected positively on a variety of dimensions. Children whose parents were exposed to the reform are less likely to participate in DI themselves as adults, do not increase their participation in other public assistance programs, invest significantly more in their education, increase their earnings, and are more likely to marry/cohabit and have a child. Our results have important implications for the evaluation of the costs and benefits of this and other policy reforms; indeed, ignoring the spillover effects of lower government transfers and increased taxes paid by the next generation greatly underestimates the cost savings of the Dutch DI reform in the long run.

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