Assessing the Effects of Reduced Access to Income Support for Disabled Young Adults

We examine the effects of the loss of income support for young adults with a work disability on employment, income, health outcomes, personal debts and criminal behaviour. Our identification strategy uses a 2015 policy reform that drastically restricted access to income support for disabled young adults in the Netherlands (DIYA). Using a fuzzy regression discontinuity (RD) approach that exploits the birth-date cutoff date for new applicant cohorts, we find that the policy change caused the gross income of young disabled adults to decrease by €4,524 per year. The withdrawal of income support payments, amounting to around €10,000 per year, was partly compensated by increased income from welfare benefits (30%) and a higher income from wage earnings (32%). Particularly women experienced a strong reduction, their annual total gross income decreased by €6,012. Based on subgroup analyses of singles and partners, we find suggestive evidence that within-household gender norms are an important driver of this difference. The loss of income support did not significantly affect medical expenditures, personal debts or criminal behaviour.