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Social Interaction Effects in Disability Pension Participation. Evidence from Plant Downsizing

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Author Info
Mari Rege, Kjetil Telle and Mark Votruba () (Statistics Norway)

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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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Publisher Info
Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 496.

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Date of creation: Mar 2007
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Handle: RePEc:ssb:dispap:496

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Related research
Keywords: disability; downsizing; layoffs; plant closings; social insurance; social interaction; welfare norms;

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
I12 - Health, Education, and Welfare - - Health - - - Health Production
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Torbjørn Hægeland, Dag Rønningen and 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. [Downloadable!]
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