In this paper, we analyze a reform of the Dutch disability insurance (DI) program in 2004, under which recipients younger than 50 years old were reassessed under a stricter eligibility criteria. Using the variation from the implementation of the reform, we examine the transitions to employment and non-employment of those claimants eligible for reassessment. Approximately 50\% of the disqualified claimants transitioned to employment two years after reassessment, 22\% started earning unemployment insurance (UI) benefits, and 38\% moved to residual non-employment states. The reform induced marginal gains in the quality of jobs found by disqualified claimants, and caused no income losses among those eligible for reassessment. Treated claimants suffering from mental disorders appear to have had sluggish transitions to employment, when compared to other medically verifiable conditions. Instead, claimants with musculoskeletal disorders had a higher employment response than the average claimant, indicating their particularly large residual employment capacity.

Discussant:
Coen van de Kraats (VU University Amsterdam)