The impact of the disability insurance reform on work resumption and benefit substitution in the Netherlands

We evaluate the disability insurance reform introduced in 2006 in the Netherlands. Using unique administrative data on individuals who fall sick before and after the reform, we analyze how the reform affected labor participation and the use of benefits from alternative benefit programs. The results of the difference-in-difference regressions suggest that the stricter benefit regime of the reform limits the access to disability insurance substantially, and increases labor participation and unemployment benefit receipt to a limited extent. However, it increases wages earned and unemployment benefits received to sizable extents. The impact of the reform is persistent over time for disability benefit and labor participation and income. The reform is least effective for unemployed and older individuals who struggle most to resume working.