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Disability Risk, Disability Benefits, and Equilibrium Unemployment

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  • Ed Westerhout

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    Abstract

    This paper analyses the labour market and efficiency effects of various kinds of disability policies. It therefore extends Pissarides (1990) model of equilibrium unemployment with disability risk and disability benefits and allows for the improper use of disability schemes by the unemployed. The paper finds that recognition of this improper use can reverse the ranking of policies. In addition, it concludes that disability policies that reduce the participation in disability schemes tend to increase the rate of official unemployment. Only policies that lower the rate of disability shocks succeed to reduce both the participation in disability and unemployment schemes. Copyright Kluwer Academic Publishers 2001

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    File URL: http://hdl.handle.net/10.1023/A:1011294105317
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    Bibliographic Info

    Article provided by Springer in its journal International Tax and Public Finance.

    Volume (Year): 8 (2001)
    Issue (Month): 3 (May)
    Pages: 219-244

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    Handle: RePEc:kap:itaxpf:v:8:y:2001:i:3:p:219-244

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    Web page: http://www.springerlink.com/link.asp?id=102915

    Related research

    Keywords: disability risk; disability benefits; equilibrium search model; equilibrium unemployment; hidden unemployment;

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    1. Parsons, Donald O, 1980. "The Decline in Male Labor Force Participation," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 117-34, February.
    2. Parsons, Donald O, 1982. "The Male Labour Force Participation Decision: Health, Reported Health, and Economic Incentives," Economica, London School of Economics and Political Science, vol. 49(193), pages 81-91, February.
    3. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
    4. Christopher A. Pissarides, 1992. "Search Unemployment with on-the-job Search," CEP Discussion Papers dp0074, Centre for Economic Performance, LSE.
    5. Doherty, N A, 1979. "National Insurance and Absence from Work," Economic Journal, Royal Economic Society, vol. 89(353), pages 50-65, March.
    6. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
    7. Haveman, Robert & Wolfe, Barbara & Warlick, Jennifer, 1988. "Labor market behavior of older men : Estimates from a Trichotomous choice model," Journal of Public Economics, Elsevier, vol. 36(2), pages 153-175, July.
    8. Hassink, R. & Ours, J.C. van & Ridder, G., 1997. "Dismissal through disability," Open Access publications from Tilburg University urn:nbn:nl:ui:12-86871, Tilburg University.
    9. Haveman, Robert H. & Wolfe, Barbara L., 1984. "Disability transfers and early retirement: a casual relationship?," Journal of Public Economics, Elsevier, vol. 24(1), pages 47-66, June.
    10. van Ours, J., 1991. "The Efficiency of the Dutch Labour Market in Matching Unemployment and Vacancies," Open Access publications from Tilburg University urn:nbn:nl:ui:12-142205, Tilburg University.
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    Cited by:
    1. Gijs Roelofs & Daniel van Vuuren, 2011. "The decentralization of Social Assistance and the rise of Disability Insurance enrolment," CPB Discussion Paper 185, CPB Netherlands Bureau for Economic Policy Analysis.
    2. van Sonsbeek, J.M. & Gradus, R.H.J.M., 2006. "A microsimulation analysis of the 2006 regime change in the Dutch disability scheme," Economic Modelling, Elsevier, vol. 23(3), pages 427-456, May.
    3. Paul Frijters & Michael A. Shields, 2001. "Welfare And Output Enhancing Moral Hazard:Disability Benefits And Endogenous Occupational Choice," Paul Frijters Discussion Papers 2001-1, School of Economics and Finance, Queensland University of Technology.

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