Webex-seminar: Income and Substitution Effects of Survivors Benefits: Evidence from Dutch Reforms

This paper investigates labor supply responses to a spouse’s death. We use rich administrative data on the universe of Dutch residents, to disentangle the effects related to spouse’s income loss from those deriving from survivors insurance compensation. First, we identify the causal impact of a spouse’s death on labor supply outcomes constructing contrefactuals using individuals that experience widowhood a few years apart. Second, we causally identify labor supply responses to change in survivors benefits, exploiting the 1996 Dutch reform which considerably tightened eligibility rules to survivors' benefits (SB). Our results show that a spouse’s death increases labor supply for individuals who had a small share of total household resources (income effect) while it decreases labor supply for individuals who had a higher share of resources (substitution and income effects). The tightening of  SB eligibility has increased labor supply, with a magnitude depending on individuals ability to smooth standards of living.