The labour market effects of insurance for disability supports: evidence from the National Disability Insurance Scheme in Australia

This paper studies the e!ects of funding for disability-related supports on labour market outcomes. Using a staggered di!erence-in-di!erences design around a large-scale reform to disability supports in Australia, I find that the reform on average increased a!ected participants’ total annual earnings by 15.7% and employment by 10.6% of the pre-treatment outcome in the four years following exposure. The e!ects are driven by previously employed workers, who have relatively high labour force attachment. The reform also led to reduced claiming of disability benefits for work incapacity, which is consistent with my positive findings on labour outcomes. Whereas studies on income-replacement schemes for people with disability find a trade-o! between disability benefits and labour supply, my findings suggest that funding for disability supports can instead increase earnings and employment.