Daniel Prinz

Disability benefits provide social insurance against the risk of losing working capacity, as well as an important source of income for individuals with disabilities. They are also costly and tend to reduce labor supply.  Although spending can be contained by careful targeting, correcting past flaws in eligibility rules or assessment procedures may entail welfare costs. This paper studies a major reform in Hungary that reassessed the health and working capacity of a large share of beneficiaries. Leveraging age and health cutoffs in the reassessment, the paper estimates employment responses to loss or reduction of benefits. The findings show that among those who left disability insurance due to the reform, 58 percent were employed in the primary labor market, 6 percent participated in public works, and 36 percent were out of work without benefits in the post-reform period. The consequences of leaving disability insurance differed sharply by pre-reform employment status. Among the beneficiaries who were employed in the pre-reform year, 81 percent worked, while only 33 percent of those without pre-reform employment did. The gains of the reform in activating beneficiaries were small and strongly driven by pre-reform employment status. This points to the importance of combining financial incentives with broader labor market programs that increase employability.

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World Bank Policy Research Working Paper 10575 | IFS Working Paper W23/27 | CERS IE Working Paper 2023/19 | Summary on Portfolio

Using rich administrative data from the Netherlands, this paper studies the consequences of firm consolidation for workers. For workers at acquired firms, takeovers are associated with an 8.5 percent drop in employment at the consolidated firm and a 2.6 percent drop in total labor income. These effects are persistent even four years later. The paper shows that the primary mechanism for this job loss is labor restructuring at consolidating firms. Workers with higher-than-expected pay relative to their human capital and workers with skills that are likely already present at acquirers are less likely to be retained. 

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World Bank Policy Research Working Paper 10477 | IFS Working Paper W22/45 | IZA Discussion Paper 15724 | Summary on CEPR VoxEU | Summary on IZA World of Labor | Summary on World Bank Let's Talk Development | Summary on Chicago Booth Stiegler Center ProMarket Blog | Twitter Thread

This paper studies the impact of a large payroll tax cut for older workers in Hungary. Motivated by the predictions of a standard equilibrium job search model, the paper examines the heterogeneous impact of the policy. Employment increases most at low-productivity firms offering low-wage jobs, which tend to hire from unemployment, while the effects are more muted for high-productivity firms offering high-wage jobs. At the same time, wages only increase at high-productivity firms. These results point to important heterogeneity in the incidence of payroll tax cuts across firms and highlight that payroll taxes have a significant impact on the composition of jobs in the labor market.

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World Bank Policy Research Working Paper 10265 | IFS Working Paper 22/49 | CERS IE Working Paper 2022/23 | Summary on World Bank Let's Talk Development | Twitter Thread

In most disability insurance programs beneficiaries lose some or all of their benefits if they earn above an earnings threshold. While intended to screen out applicants with high remaining working capacity, earnings limits can also distort the labor supply of beneficiaries. We use a reduction in the earnings limit in Hungary to evaluate this trade-off and examine screening and labor supply responses. We find that the policy changed selection into the program modestly but reduced labor supply on the intensive margin significantly. These findings suggest that the earnings threshold should be higher.

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Publisher's Version

World Bank Policy Research Working Paper 10325 | IFS Working Paper W22/20 | IZA Discussion Paper 15377 | Boston College Center for Retirement Research Working Paper 2023-23 | CERS IE Working Paper 2022/14 | Summary on IZA News | Summary on World Bank Let's Talk Development

We study the implications of the minimum wage for taxation in an environment with imperfect enforcement and informality. Leveraging an increase in the audit threat for declared earnings below a threshold at twice the minimum wage in Hungary, we estimate reporting and employment responses with administrative panel data. Our bunching and difference-in-differences results show that a substantial share of those who report earning the minimum wage earn at least the same amount off the books. Our key insight is that a taxed minimum wage serves as a backstop on underreporting and recovers some revenue—even though it also increases informality.

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Publisher's Version

IFS Working Paper W21/41 | CERS IE Working Paper 2020/43 | Summary on Defacto | Twitter Thread

We study two mechanisms used by public health insurance programs for rationing healthcare: outsourcing to private managed care plans and quantity limits for prescription drugs. Leveraging a natural experiment in Texas's Medicaid program, we find that the shift to managed care and the relaxation of a strict drug cap increased access to high-value drugs and outpatient services and reduced avoidable hospitalizations. Program costs increased significantly, indicating a trade-off between cost and quality. We provide suggestive evidence attributing the reduction in hospitalizations to the relaxation of the drug cap and much of the spending increase to the shift to managed care.

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NBER Working Paper 26042 | NBER Disability Research Center Paper NB 18-13 | Executive Summary | Summary in the NBER Bulletin on Retirement and Disability | Summary on Vox | Summary in the Brookings Hutchins Roundup | Summary on CEPR VoxEU | Cato Institute Research Briefs in Economic Policy No. 203 | Twitter Thread 1 | Twitter Thread 2 

Insurance is typically viewed as a mechanism for transferring resources from good to bad states. Insurance, however, may also transfer resources from high-liquidity periods to low-liquidity periods. We test for this type of transfer from health insurance by studying the distribution of Social Security checks among Medicare recipients. When Social Security checks are distributed, prescription fills increase by 6–12 percent among recipients who pay small copayments. We find no such pattern among recipients who face no copayments. The results demonstrate that more-complete insurance allows recipients to consume healthcare when they need it rather than only when they have cash. 

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Publisher's Version

NBER Working Paper 27977 | Summary in The Hill | Summary in Harvard Business Review | Presentation Video | Twitter Thread 1 | Twitter Thread 2 | Twitter Thread 3

Using mortality registers and administrative data on income and population, we develop new evidence on the magnitude of life expectancy inequality in Hungary and the scope for health policy in mitigating this. We document considerable inequalities in life expectancy at age 45 across settlement-level income groups, and show that these inequalities have increased between 1991–96 and 2011–16 for both men and women. We show that avoidable deaths play a large role in life expectancy inequality. Income-related inequalities in health behaviours, access to care, and healthcare use are all closely linked to the inequality in life expectancy. 

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HAS CERS IE Working Paper 2020/19 | Project Website | Summary on Index.hu | Summary on Portfolio | Summary on Defacto | Article review in Egészségfejlesztés

We use high-frequency Google search data, combined with data on the announcement dates of non-pharmaceutical interventions (NPIs) during the COVID-19 pandemic in U.S. states, to disentangle the short-run direct impacts of multiple different state-level NPIs in an event study framework. Exploiting differential timing in the announcements of restaurant and bar limitations, non-essential business closures, stay-at-home orders, large-gatherings bans, school closures, and emergency declarations, we leverage the high-frequency search data to separately identify the effects of multiple NPIs that were introduced around the same time. We then describe a set of assumptions under which proxy outcomes can be used to estimate a causal parameter of interest when data on the outcome of interest are limited. Using this method, we quantify the share of overall growth in unemployment during the COVID-19 pandemic that was directly due to each of these state-level NPIs. We find that between March 14 and 28, restaurant and bar limitations and non-essential business closures can explain 6.0% and 6.4% of UI claims respectively, while the other NPIs did not directly increase own-state UI claims. This suggests that most of the short-run increase in UI claims during the pandemic was likely due to other factors, including declines in consumer demand, local policies, and policies implemented by private firms and institutions. 

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SSRN 3581254 | Covid Economics 17: 24-72 | Twitter Thread

Using administrative data on a random 50% of the Hungarian population, including individual-level information on incomes, healthcare spending, and mortality for the 2003-2011 period, we develop new evidence on the distribution of healthcare spending and mortality in Hungary by income and geography. By linking detailed administrative data on employment, income, and geographic location with measures of healthcare spending and mortality we are able to provide a more complete picture than the existing literature which has relied on survey data. We compute mean spending and 5-year and 8-year mortality measures by geography and income quantiles, and also present gender and age adjusted results.

We document four patterns: (i) substantial geographic heterogeneity in healthcare spending; (ii) positive association between labor income and public healthcare spending; (iii) geographic variation in the strength of the association between labor income and healthcare spending; and (iv) negative association between labor income and mortality. In further exploratory analysis, we find no statistically significant correlation between simple county-level supply measures and healthcare spending. We argue that taken together, these patterns suggest that individuals with higher labor income are in better health but consume more healthcare because they have better access to services.

Our work suggests new directions for research on the relationship between health inequalities and healthcare spending inequalities and the role of subtler barriers to healthcare access. 

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Publisher's Version

HAS CERS IE Discussion Paper 2019/9 | Project Website | Summary on Index.hu | Summary on Defacto | Summary on Qubit.hu | Article review in Egészségfejlesztés

We study insurers’ use of prescription drug formularies to screen consumers in the ACA Health Insurance Exchanges. We begin by showing that Exchange risk adjustment and reinsurance succeed in neutralizing selection incentives for most, but not all, consumer types. A minority of consumers, identifiable by demand for particular classes of prescription drugs, are predictably unprofitable. We then show that contract features relating to these drugs are distorted in a manner consistent with multi-dimensional screening. The empirical findings support a long theoretical literature examining how insurance contracts offered in equilibrium can fail to optimally trade-off risk protection and moral hazard.

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Publisher's Version

NBER Working Paper 22832 | Executive Summary | Summary on the Incidental Economist

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Publisher's Version | Publisher's Version in Hungarian 

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Publisher's Version | Publisher's Version in Hungarian 

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Publisher's Version | Publisher's Version in Hungarian 

Paper | Hungarian Version

Publisher's Version | Publisher's Version in Hungarian 

We study variation in healthcare utilization across geographies and socioeconomic groups in Hungary. Exploiting migration across geographic regions and relying on high-quality administrative data on healthcare use and income we show that the role of place-specific supply factors is heterogeneous across types of care and across socioeconomic groups. Overall, place-specific factors account for 68% of the variation in outpatient spending and 35% of the variation in drug spending, but almost none of the variation in inpatient spending. Place effects explain four-fifth of outpatient spending variation for non-employed working-age individuals, but less than two-fifth for individuals with above-median wage incomes. There is a positive association between place effects and outpatient capacity, especially for low-income individuals. These results suggest that access to healthcare varies especially for low-income people even in a context with universal coverage.

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CERS IE Working Paper 2023/18

While an extensive literature investigates the effects of longer schooling, we know very little about what happens when compulsory schooling is shortened. This paper looks at the effects of a reform in Hungary that decreased the school leaving age from 18 to 16. We show that the reform increased the probability of being neither in education nor in employment and being inactive at ages 16-18 substantially while its effects on employment are not significantly different from zero in most specifications. These effects are similar among boys and girls but strongly heterogeneous by social background and ability. The reform had a moderate effect on teenage motherhood on average, but it increased the probability of giving birth substantially among the most disadvantaged girls. We conclude that through its heterogenous effects, the reform is expected to widen social inequalities.

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CERS IE Working Paper 2021/40 | Summary on G7

The economic crisis caused by the COVID-19 pandemic has sharply reduced mobility and economic activity, disrupting the lives of people around the globe. This paper presents estimates on the early impact of the crisis on labor markets in 39 countries based on high-frequency phone survey data collected between April and July 2020. Workers in these countries experienced severe labor market disruptions following the COVID-19 outbreak. Based on simple averages across countries, 34 percent of the respondents reported stopping work, 20 percent of wage workers reported lack of payment for work performed, 9 percent reported job changes due to the pandemic, and 62 percent reported income loss in their household. Stopping work was more prevalent in the industrial and service sectors than in agriculture. Measures of work stoppage and income loss in the high-frequency phone survey are generally consistent with gross domestic product growth projections in Latin America and the Caribbean but not in Sub-Saharan Africa. This suggests that the survey data contribute new and important information on economic impacts in low-income countries. 

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World Bank Policy Research Working Paper 9510 | World Bank Jobs Working Paper 58 | World Bank JobsWatch Covid-19 Brief | World Bank Jobs Group Blog | World Bank Covid-19 High-Frequency Monitoring Dashboard

We develop a framework to study optimal disability insurance when employers exhibit moral hazard and show that the optimal system takes into account employer-side moral hazard and selective hiring. We illustrate these insights using a reform in the Netherlands that extended experience rating to temporary workers. Using this reform, we document a 24% decrease in disability inflow. We also find an increase in worker selection, accounting for 14% of the overall decrease. Using our model, we evaluate the normative implications of the experience rating policy. We conclude that, given reasonable assumptions, the policy improved welfare and additional employer responsibility would further add to social welfare. 

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We use data on enrollment in the Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) program and data on health care spending by Medicaid beneficiaries to analyze the extent to which Medicaid spending is predictive of future disability insurance receipt among non-disabled teenagers and future disability insurance disenrollment among disabled teenagers. In our first set of analyses, we find that we currently do not have enough data to predict future SSI and SSDI enrollment among non-disabled teenagers. In our second set of analyses, we find that observed Medicaid spending among disabled teenagers can be used to predict SSI disenrollment. Our results indicate that machine learning models using information on healthcare spending may be useful for identifying current teenage SSI recipients who are more or less likely to be removed from SSI. 

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NBER Disability Research Center Paper NB 18-Q4 | Executive Summary 

We merge the universe of 2000-2018 W-2 earnings records to the universe of 2000-2018 SSA-1099 forms to estimate the Social Security Disability Insurance (SSDI) claiming rate of each employer's employees. We document large variation across industries in claiming rates. We also show that SSDI claiming rates correlate with characteristics of firms that signal firm quality. There is a positive association between firm size and employee SSDI claiming, except for the largest firms, which have lower employee claiming rates. In addition, we document a negative association between employee wages and SSDI claiming. In future work, we will estimate the relationship between employer and employee wage premiums and SSDI claiming. 

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We systematically review the literature linking health to economic activity, particularly education and labor market outcomes, over the lifecycle. In the first part, we review studies that link childhood health to later-life outcomes. The main themes we focus on are in-utero exposures, birthweight, physical health and nutrition, mental health, and the environment. In the second part, we review studies of the impact of health on labor market success for adults. The main themes we focus on are the environment, disability, physical health shocks, within-household spillovers, cancer, and mental health. 

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NBER Working Paper 24865 | Summary in the New York Times