Disability benefit microsimulation models in the Netherlands

Disability rates in the Netherlands used to be among the highest in the world. In 2002 the number of disability recipients approached one million. However, since then the number of disability cases has dropped remarkably due to a number of policy changes, the last of which being the new 2006 disability insurance scheme. On the other hand, in recent years the number of beneficiaries in the special scheme dedicated to the young handicapped has increased rapidly.In order to evaluate various policy alternatives and to forecast the effects of the 2006 law, a dynamic microsimulation model has been developed at the Ministry of Social Affairs and Employment. This model has evolved into four separate forecasting models for the various disability schemes that are currently in force and are now fully integrated into the budget process. In these models, transitions within the disability schemes are estimated with multinomial logistic regression models based on administrative datasets. Current long-term forecasts show that the number of disability beneficiaries stabilizes at the current level of 800,000. The decreasing number of benefits in the employees' scheme is compensated by an increase in the scheme for the young handicapped. These long-term forecasts have been an important input for determining the focus of the new government's plans on disability insurance, namely to reduce the number of benefits of the young handicapped.

► We developed dynamic microsimulation models for forecasting disability schemes. ► Transition probabilities are estimated with multinomial logistic regression models. ► Effective policy reforms have decreased annual inflow since 2000 by two-thirds. ► Current long term forecast of the employee's scheme amounts to 400,000 benefits. ► This trend is partly compensated by the increasing number of young handicapped.