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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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Cited by:
  1. 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 509, Research Department of Statistics Norway.
  2. Gordon B. Dahl & Katrine Vellesen Loken & Magne Mogstad, 2013. "Peer Effects in Program Participation," CESifo Working Paper Series 4349, CESifo Group Munich.
  3. 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).
  4. Steven J. Atlas & Jonathan Skinner, 2010. "Education and the Prevalence of Pain," NBER Chapters, in: Research Findings in the Economics of Aging, pages 145-166 National Bureau of Economic Research, Inc.
  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 531, Department of Economics, University of Siena.
  6. Markussen, Simen & Røed, Knut, 2012. "Social Insurance Networks," IZA Discussion Papers 6446, 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 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. Bratberg, Espen & Nilsen, Øivind Anti & Vaage, Kjell, 2012. "Is Recipiency of Disability Pension Hereditary?," Working Papers in Economics 07/12, University of Bergen, Department of Economics.
  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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