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Disability Risk, Disability Benefits, and Equilibrium Unemployment

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Author Info
Ed Westerhout ()
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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Publisher 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

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

References listed on IDEAS
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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. [Downloadable!] (restricted)
  2. Peter Birch Sørensen, 1997. "Optimal Tax Progressivity in Imperfect Labour Markets," Discussion Papers 97-06, University of Copenhagen. Department of Economics. [Downloadable!]
  3. Doherty, N A, 1979. "National Insurance and Absence from Work," Economic Journal, Royal Economic Society, vol. 89(353), pages 50-65, March. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. Peter Birch Sørensen, . "Optimal Tax Progressivity in Imperfect Labour Markets," EPRU Working Paper Series 97-10, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  6. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December. [Downloadable!] (restricted)
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