The Employment Effects of Disability Benefits Without Work Restrictions

Disability benefits can reduce work via income and substitution effects. Distinguishing them matters: income effects are non-distortionary; substitution effects create deadweight loss. We isolate pure income effects of the UK’s Personal Independence Payment (PIP), which compensates disability costs without work restrictions or earnings tests. Exploiting the 2013 reform, we combine differential condition-specific eligibility changes with quasi-random regional assignment to assessment providers in a difference-in-differences design. Despite substantial benefit receipt changes (1.8-5.9pp across strategies), we only find positive employment effects in stricter assessment regions. For individuals who gain/lose benefits due to condition-specific eligibility changes, the effects are close to zero.