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Disability in the Welfare State: An Unemployment Problem in Disguise?

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Author Info

  • Bratsberg, Bernt

    ()
    (Ragnar Frisch Centre for Economic Research)

  • Fevang, Elisabeth

    ()
    (Ragnar Frisch Centre for Economic Research)

  • Røed, Knut

    ()
    (Ragnar Frisch Centre for Economic Research)

Abstract

Economies with low unemployment often have high disability rates. In Norway, the permanent disability insurance rolls outnumber registered unemployment by four to one. Based on administrative register data matched with firms' financial statements and closure data collected from bankruptcy proceedings, we show that a large fraction of Norwegian disability insurance claims can be directly attributed to job displacement and other adverse shocks to employment opportunities. For men, we estimate that job loss more than doubles the risk of entry to permanent disability and that displacements account for fully 28 percent of all new disability insurance claims. We conclude that unemployment and disability insurance are close substitutes.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4897.

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Length: 49 pages
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4897

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Keywords: social insurance; displacement; disability; employment opportunities;

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References

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  1. Kevin F. Hallock, 2009. "Job Loss and the Fraying of the Implicit Employment Contract," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 23(4), pages 69-93, Fall.
  2. Daniel Sullivan & Till von Wachter, 2009. "Job Displacement and Mortality: An Analysis Using Administrative Data," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(3), pages 1265-1306, August.
  3. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 92-28, Federal Reserve Bank of Chicago.
  4. Dan Black & Kermit Daniel & Seth Sanders, 2002. "The Impact of Economic Conditions on Participation in Disability Programs: Evidence from the Coal Boom and Bust," American Economic Review, American Economic Association, American Economic Association, vol. 92(1), pages 27-50, March.
  5. Eliason, Marcus & Storrie, Donald, 2004. "Does job loss shorten life?," Working Papers in Economics, University of Gothenburg, Department of Economics 153, University of Gothenburg, Department of Economics, revised 17 Sep 2007.
  6. Hamermesh, Daniel S, 1987. "The Costs of Worker Displacement," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(1), pages 51-75, February.
  7. Bratberg, Espen, 1999. " Disability Retirement in a Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 101(1), pages 97-114, March.
  8. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, Elsevier, vol. 30(1-2), pages 239-267.
  9. Tamás Bartus, 2005. "Estimation of marginal effects using margeff," Stata Journal, StataCorp LP, StataCorp LP, vol. 5(3), pages 309-329, September.
  10. Bratsberg, Bernt & Raaum, Oddbjørn & Røed, Knut, 2007. "When Minority Labor Migrants Meet the Welfare State," IZA Discussion Papers 2872, Institute for the Study of Labor (IZA).
  11. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, Elsevier, vol. 32(3), pages 385-397, August.
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  13. Bruce C. Fallick, 1996. "A review of the recent empirical literature on displaced workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(1), pages 5-16, October.
  14. Røed, Knut & Fevang, Elisabeth, 2009. "Organisational Change, Absenteeism and Welfare Dependency," HERO On line Working Paper Series, Oslo University, Health Economics Research Programme 2005:9, Oslo University, Health Economics Research Programme.
  15. Svenn-Age Dahl & Oivind Anti Nilsen & Kjell Vaage, 2000. "Work or retirement? Exit routes for Norwegian elderly," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 32(14), pages 1865-1876.
  16. Mari Rege & Kjetil Telle & Mark Votruba, 2009. "The Effect of Plant Downsizing on Disability Pension Utilization," Journal of the European Economic Association, MIT Press, MIT Press, vol. 7(4), pages 754-785, 06.
  17. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  18. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, American Economic Association, vol. 81(1), pages 319-24, March.
  19. Eliason, Marcus & Storrie, Donald, 2009. "Job loss is bad for your health - Swedish evidence on cause-specific hospitalization following involuntary job loss," Social Science & Medicine, Elsevier, Elsevier, vol. 68(8), pages 1396-1406, April.
  20. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 13(4), pages 653-77, October.
  21. David H. Autor & Mark G. Duggan, 2003. "The Rise In The Disability Rolls And The Decline In Unemployment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(1), pages 157-205, February.
  22. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(1), pages 115-136, Winter.
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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?," IZA Discussion Papers 6508, Institute for the Study of Labor (IZA).
  2. Kostol, Andreas Ravndal & Mogstad, Magne, 2012. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work," IZA Discussion Papers 6702, Institute for the Study of Labor (IZA).
  3. Basten, Christoph & Fagereng, Andreas & Telle, Kjetil, 2012. "Cash-on-Hand and the Duration of Job Search: Quasi-Experimental Evidence from Norway," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62085, Verein für Socialpolitik / German Economic Association.
  4. Markussen, Simen & Mykletun, Arnstein & Røed, Knut, 2012. "The case for presenteeism — Evidence from Norway's sickness insurance program," Journal of Public Economics, Elsevier, Elsevier, vol. 96(11), pages 959-972.
  5. Nilsen, Øivind A. & Reiso, Katrine Holm, 2011. "Scarring effects of unemployment," Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics 26/2011, Department of Economics, Norwegian School of Economics.
  6. Markussen, Simen & Røed, Knut, 2012. "Social Insurance Networks," IZA Discussion Papers 6446, Institute for the Study of Labor (IZA).
  7. Ola Lotherington Vestad, 2012. "Labour supply effects of early retirement provision," Discussion Papers, Research Department of Statistics Norway 717, Research Department of Statistics Norway.

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