Financial incentives and disability rates

Can financial incentives encourage disability program participants to work? Due to a lack of randomized experiments with well-defined treatment and control groups, there is little evidence on this question. This paper helps to fill the void by exploiting a policy change in the Norwegian disability system that approximates a well-controlled policy experiment. The results show that financial incentives induce many disability recipients to work, enough so that overall program costs fall in spite of the added financial incentives. The analysis points to the possibility that incorporating financial incentives into the U.S. disability system could achieve similar results.

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