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Employment and Welfare Effects of the Quota for Disabled Workers in Brazil

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Abstract

I study the effect of a quota for disabled workers on the labor market and on welfare. Using a task-based model, I show that the effect of a quota will depend on the productivity of disabled workers and their labor supply elasticity. I estimate the productivity of disabled workers using variation from inspections of the quota. I find that the quota increased the hiring of disabled workers, but it reduced wages and employment of non-disabled workers, suggesting that the quota reduced firms’ productivity. I estimate the labor supply elasticity of disabled workers using heterogeneous exposure across regions. Using the model calibrated to the empirical estimates, I find that the quota for disabled workers decreased welfare by 0.33% and forced the government to increase marginal taxes. However, alternatively, a subsidy for disabled workers could increase welfare.

Suggested Citation

  • Gustavo de Souza, 2020. "Employment and Welfare Effects of the Quota for Disabled Workers in Brazil," Working Paper Series WP 2023-11, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:95999
    Note: Updated March 14, 2023
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    More about this item

    Keywords

    quota for disabled workers; disability insurance; Fiscal Policy;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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