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Removing Disability Insurance Coverage: The Effects on Work Incentive and Occupation Choice

by Tanaka, Atsuko, Hsuan-Chih (Luke) Lin and Ha Nguyen

This paper studies how removing disability insurance coverage affects workers' work incentive and occupation choice. To do so, we exploit the 1997 Canadian Pension Plan (CPP) disability program reform, which required longer work experience for individuals to be eligible for disability insurance. The empirical strategy includes difference-in-difference and triple-difference estimations. The results show that the reform significantly increased work incentive for male individuals with a long non-employment spell. However, the rise in work incentive increased only unemployment, not employment. We also find that the reform barely affected the distribution of employment across occupation.

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