Disability retirement in a welfare state

The increasing number of disability pensioners may put a strain on the welf are state. In this paper, we try to assess the effect of financial incentiv es on disability entrance. A sample of Norwegians on long-term sick leave a t the beginning of 1989 is examined as of the end of 1989, and the exit rou tes are studied in a multinomial legit model. The results indicate that the incentive effects of wages are larger than the disincentive effects of ben efits. Furthermore, there is no evidence that having a "subjective" diagnos is affects the probability of becoming a disability pensioner.