Immigrant Responses to Social Insurance Generosity

Abstract

Immigrants from low-income source countries tend to be underrepresented in employment and overrepresented in social insurance programs. Based on administrative data from Norway, we examine whether such gaps reflect systematic differences in impacts of social insurance benefits on work incentives. Drawing on a reform of the temporary disability insurance program, we identify negative employment and earnings effects of higher benefits. While behavioral responses are significantly larger for immigrants, these immigrant-native differentials are largely explained by differences in earnings prospects, family structure, and job opportunities. We also uncover cross effects of benefits on the labor supply of spouses, amplifying the adverse effects on family earnings.