Labor Supply Effects of Survivor Insurance Evidence from Restricted Access to Survivor Benefits in the Netherlands

Résumé 0

This paper investigates the effects of survivor benefits (SB) on labor supply. Building on rich administrative data on the universe of Dutch residents, we use the 1996 Dutch reform that considerably tightened SB eligibility rules to causally identify the labor supply effect of SB. We use a regression discontinuity approach, leveraging the cohort-based implementation of the reform. We show that, following the tightening of SB eligibility, individual income and labor force participation after spousal death increase significantly (+23% and 16% respectively). We further decompose those effects between the extensive and intensive margins. We show that the widows who remained in the labor market due to the reform mainly did so as wage earners, and that already working widows increased their number of working hours by 8%. We also find evidence of program substitution of widows toward disability insurance and welfare as a result of the reform. Finally, our heterogeneity results suggest that the magnitude of the response to the reform depends on widows’ ability to self-insure against the risk of spousal death.