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Social Interaction Effects in Disability Pension Participation: Evidence from Plant Downsizing

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  • Mari Rege
  • Kjetil Telle
  • Mark Votruba

Abstract

We estimate the magnitude of social interaction effects in disability pension participation among older workers in Norway. Specifically, we investigate how a worker’s propensity to draw disability benefits is affected by a plausibly exogenous shock to the disability entry rate of similarly-aged workers in his or her neighborhood. The problem of omitted variable bias is addressed by employing a novel instrumental variable (IV) strategy, using plant downsizing at neighbors’ plants of employment as an instrument for the disability entry rate among one’s previously employed neighbors. Our IV estimates suggest that a one percentage point increase in the participation rate of previously employed neighbors increased the subsequent 4-year entry rate of workers by about one-half a percentage point. Numerous robustness and specification tests appear to support the validity of the identifying assumption in our IV strategy.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 114 (2012)
Issue (Month): 4 (December)
Pages: 1208-1239

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Handle: RePEc:bla:scandj:v:114:y:2012:i:4:p:1208-1239

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Citations

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Cited by:
  1. Bratberg, Espen & Nilsen, Øivind Anti & Vaage, Kjell, 2012. "Is Recipiency of Disability Pension Hereditary?," Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics 10/2012, Department of Economics, Norwegian School of Economics.
  2. Steven J. Atlas & Jonathan S. Skinner, 2009. "Education and the Prevalence of Pain," NBER Working Papers 14964, National Bureau of Economic Research, Inc.
  3. Gordon B. Dahl & Katrine V. L?ken & Magne Mogstad, 2014. "Peer Effects in Program Participation," American Economic Review, American Economic Association, vol. 104(7), pages 2049-74, July.
  4. Torbjørn Hægeland & Dag Rønningen & Kjell G. Salvanes, 2007. "Adapt or withdraw? Evidence on technological changes and early retirement using matched worker-firm data," Discussion Papers, Research Department of Statistics Norway 509, Research Department of Statistics Norway.
  5. Ethan Cohen-Cole & Giulio Zanella, 2008. "Welfare Stigma or Information Sharing? Decomposing Social Interactions Effects in Social Benefit Use," Department of Economics University of Siena, Department of Economics, University of Siena 531, Department of Economics, University of Siena.
  6. Markussen, Simen & Røed, Knut, 2014. "Leaving Poverty Behind? The Effects of Generous Income Support Paired with Activation," IZA Discussion Papers 8245, Institute for the Study of Labor (IZA).
  7. Blume, Lawrence E. & Brock, William A. & Durlauf, Steven N. & Jayaraman, Rajshri, 2013. "Linear Social Interactions Models," Economics Series, Institute for Advanced Studies 298, Institute for Advanced Studies.
  8. Henningsen, Morten, 2008. "Benefit shifting: The case of sickness insurance for the unemployed," Labour Economics, Elsevier, vol. 15(6), pages 1238-1269, December.
  9. Markussen, Simen & Røed, Knut, 2012. "Social Insurance Networks," IZA Discussion Papers 6446, Institute for the Study of Labor (IZA).
  10. Kroft, Kory, 2008. "Takeup, social multipliers and optimal social insurance," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 722-737, April.

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