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How Does Disability Affect Incomes? An Empirical Study on Older European Workers

Author

Listed:
  • Justine Bondoux
  • Thomas Barnay
  • Florence Jusot
  • Thomas Renaud

Abstract

This paper studies the impact of the onset of disability on personal income. Using the Survey of Health, Ageing and Retirement in Europe, we compare income trajectories of individuals who experience disability with those who remain healthy over the same period. We hypothesize that the onset of disability reduces overall personal income, as the loss in wages is not fully compensated by disability-related benefits. To identify the causal impact, we combine a difference-in-differences approach with kernel propensity score matching, controlling for both observable and time-invariant unobservable individual characteristics. Our results confirm this hypothesis, showing a substantial decrease in personal income driven primarily by reduced wages. We further investigate heterogeneous effects by gender and the generosity of social welfare systems, showing that more generous welfare states mitigate income losses due to disability.

Suggested Citation

  • Justine Bondoux & Thomas Barnay & Florence Jusot & Thomas Renaud, 2025. "How Does Disability Affect Incomes? An Empirical Study on Older European Workers," Annals of Economics and Statistics, GENES, issue 158, pages 45-80.
    • Handle: RePEc:adr:anecst:y:2025:i:158:p:45-80
    DOI: 10.2307/48845128
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    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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