Financial incentives in disability insurance in the Netherlands

In this paper, we assess the impact of financial incentives on the inflow in the public Disability Insurance (DI) scheme in the Netherlands. For this matter, the variation in replacement rates over different sectors is exploited to estimate the probability of DI enrolment over a sample of employees from the Dutch Income Panel (1996-2000). On the basis of these administrative data, we find a point estimate of the elasticity of DI enrolment with respect to the DI wealth rate of 2.5.

Do Financial Incentives Affect Fertility?

This paper investigates how fertility responds to changes in the price of a marginal child and in household income. We construct a large, individual-level panel data set of married Israeli women during the period 1999–2005 that contains fertility histories and detailed controls. We exploit variation in Israel’s child subsidy program to identify changes in the price of a marginal child (using changes in the subsidy for a marginal child) and to instrument for household income (using changes in the subsidy for infra-marginal children). We find a significant and positive price effect on fertility: the mean level of marginal child subsidy produces a 7.8 percent increase in fertility. There is a positive effect within all religious and ethnic subgroups, including the ultra-Orthodox Jewish population, whose social and religious norms discourage family planning. There is also a significant price effect on fertility among women who are close to the end of their lifetime fertility, suggesting that at least part of the price effect is due to a reduction in total fertility. As expected, the child subsidy has no effect in the upper range of the income distribution. Finally, consistent with the predictions of Becker (1960) and Becker and Tomes (1976), we find that the income effect is small in magnitude and is negative at low income levels and positive at high levels.

New Zealand’s Social Assistance System: Financial Incentives to Work

This paper is a stock take of the financial incentives to work present in New Zealand’s social assistance system. The purpose of this paper is to provide a basis for research on problems facing the social assistance system and dilemmas that would be likely to arise when considering potential initiatives to address such problems. The current financial incentives to work contained in the social assistance system reflect efforts to tailor different financial incentives to different groups in the population. No single structure of financial incentives is appropriate for all people and at all times. It is therefore necessary from time to time to consider whether existing financial incentives continue to meet government objectives, such as encouraging work among different groups in the population. Improving the structure of financial incentives, however, defies simple solutions and requires trade-offs between competing and conflicting objectives to be made. In order to set the scene for later discussion, this paper begins with a brief description of the evolution of New Zealand’s social assistance system. This paper then moves on to discuss the financial returns from social assistance programmes and the distribution of the financial disincentives to work present in the current social assistance system. A number of further considerations are then discussed, particularly accommodation and childcare costs and the length of time that people tend to spend on social welfare benefits. This paper then considers the need for trade-offs between policy outcomes when developing policy initiatives to improve financial incentives to work before presenting a summary of its main findings. Appendixes to this paper describe the programmes that make up New Zealand’s three-tier social assistance system, key features of the personal income tax scale, a method for calculating Effective Marginal Tax Rates (EMTRs), and TaxMod and the Household Economic Survey (HES).Social Security, Social Assistance

Tax and Benefit Reforms in a Model of Labour Market Transitions. ENEPRI Research Reports No. 25, 9 October 2006

This paper presents a method for taking advantage of labour market transitions to identify the effects of financial incentives on employment decisions. The framework used is very flexible and by imposing few theoretical assumptions it allows us to extend the modelled sample relative to structural models. The authors take advantage of this flexibility to include disabled persons in the model and to jointly analyse the behaviour of disabled and non-disabled persons. A great deal of attention is paid to the appropriate modelling of financial incentives in the labour market. In the case of disabled persons, taking account of financial incentives turns out to be an extremely complex process but one that in the end turns out to be well worth the effort. The model is used to compare reactions in the labour market to marginal changes in financial incentives and also to model one of the most important reforms of the UK Labour government – the introduction of the Working Families’ Tax Credit. The methodology relies on matching the transition and income data derived from cross-sectional and panel surveys, and could be used in other countries for which detailed, reliable income data are not collected in a panel format

The Effect of Financial Incentives and Task-specific Cognitive Abilities on Task Performance

We extend evidence on the interaction between financial incentives and cognitive abilities by focusing on the effect of task-specific abilities. In a memory-intensive task situated in an accounting context, the effect of accounting education on performance is stronger under financial incentives as compared to flat rate pay. Subjects with more accounting education respond stronger to financial incentives. Hence using incentives efficiently may involve targeting them at high-ability individuals. More generally, taking into account the incentive-ability interaction seems important when interpreting observed behavior in cognitively demanding lab and field economic environments.Financial incentives, Cognitive ability, Performance, Experiment

Healthcare providers' views on the acceptability of financial incentives for breastfeeding:a qualitative study

BACKGROUND: Despite a gradual increase in breastfeeding rates, overall in the UK there are wide variations, with a trend towards breastfeeding rates at 6–8 weeks remaining below 40% in less affluent areas. While financial incentives have been used with varying success to encourage positive health related behaviour change, there is little research on their use in encouraging breastfeeding. In this paper, we report on healthcare providers’ views around whether using financial incentives in areas with low breastfeeding rates would be acceptable in principle. This research was part of a larger project looking at the development and feasibility testing of a financial incentive scheme for breastfeeding in preparation for a cluster randomised controlled trial. METHODS: Fifty–three healthcare providers were interviewed about their views on financial incentives for breastfeeding. Participants were purposively sampled to include a wide range of experience and roles associated with supporting mothers with infant feeding. Semi-structured individual and group interviews were conducted. Data were analysed thematically drawing on the principles of Framework Analysis. RESULTS: The key theme emerging from healthcare providers’ views on the acceptability of financial incentives for breastfeeding was their possible impact on ‘facilitating or impeding relationships’. Within this theme several additional aspects were discussed: the mother’s relationship with her healthcare provider and services, with her baby and her family, and with the wider community. In addition, a key priority for healthcare providers was that an incentive scheme should not impact negatively on their professional integrity and responsibility towards women. CONCLUSION: Healthcare providers believe that financial incentives could have both positive and negative impacts on a mother’s relationship with her family, baby and healthcare provider. When designing a financial incentive scheme we must take care to minimise the potential negative impacts that have been highlighted, while at the same time recognising the potential positive impacts for women in areas where breastfeeding rates are low

Does Fertility Respond to Financial Incentives?

There has been little empirical work evaluating the sensitivity of fertility to financial incentives at the household level. We put forward an identification strategy that relies on the fact that variation of wages induces variation in benefits and tax credits among "comparable households. We implement this approach by estimating a discrete choice model of female participation and fertility, using individual data from the French Labor Force Survey and a fairly detailed representation of the French tax-benefit system. Our results suggest that financial incentives play a notable role in determining fertility decisions in France, both for the first and for the third child. As an example, an unconditional child benefit with a direct cost of 0.3% of GDP might raise total fertility by about 0.3 point.population, fertility, incentives, benefits

Favouritism and financial incentives: A natural experiment

Principals who exercise favouritism towards certain agents may harm those who are not so favoured. Other papers have produced evidence consistent with the presence of such favouritism but have been unable to consider methods for controlling it. We address this issue in the context of a natural experiment from English soccer, where one particular league introduced professional referees in 2001-02, thereby changing the financial incentives and monitoring regime faced by these referees. Because the change was not effected in all leagues, the ‘experiment’ has both cross-sectional and intertemporal dimensions. We study the effects of professional referees on an established measure of referee bias: length of injury time in close matches. We find that referees exercised favouritism prior to professionalism but not afterwards, having controlled for selection and soccer-wide effects. The results are consistent with a financial incentive effect as a result of professional referees and indicate that subtle aspects of principal-agent relationships (such as favouritism) are amenable to contractual influence.Favouritism, financial incentives, soccer, referee

Physician Financial Incentives and Cesarean Section Delivery

The 'induced demand' model states that in the face of negative income shocks physicians may exploit their agency relationship with patients by providing excessive care in order to maintain their incomes. We test this model by exploiting an exogenous change in the financial environment facing obstetrician/gynecologists during the 1970s: declining fertility in the U.S. We argue that the 13.5% fall in fertility over the 1970-1982 period increased the income pressure on ob/gyns, and led them to substitute from normal childbirth towards a more highly reimbursed alternative, cesarean delivery. Using a nationally representative micro-data set for this period, we show that there is a strong correlation between within state declines in fertility and within state increases in cesarean utilization. This correlation is robust to consideration of a variety of alternative hypotheses, and appears to be symmetric with respect to periods of fertility decline and fertility increase.