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The effects of a disability employment quota when compliance is cheaper than defiance

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  • Judit Krekó
  • Álmos Telegdy

Abstract

This paper evaluates the effects of the Hungarian disability employment quota, which requires firms over a size threshold to employ individuals with disabilities or pay a non‐compliance tax. In 2010, the tax was raised from very low levels to 170% of the minimum wage cost associated with meeting the quota. We employ a regression discontinuity design on firm‐level data to estimate the effects of the policy and provide a lower‐bound estimate to account for the potential bias resulting from firms bunching below the threshold. Firms respond to the quota by hiring 0.24–0.29 additional workers with disabilities, with a lower bound estimate of 0.12–0.17. However, about two‐thirds of the quota is not fulfilled, which is puzzling as the tax is higher than the minimum wage cost of a worker with disabilities. Our model shows that high hiring costs associated with employing individuals with disabilities might be an important factor behind this anomaly. We test this hypothesis by showing that the effect is weaker in regions with a low share of individuals with disabilities, implying that without adequate policies targeting the removal of supply‐side barriers to the employment of people with disabilities, even strong demand‐side financial incentives cannot achieve their goals.

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  • Judit Krekó & Álmos Telegdy, 2025. "The effects of a disability employment quota when compliance is cheaper than defiance," Economica, London School of Economics and Political Science, vol. 92(366), pages 614-643, April.
    • Handle: RePEc:bla:econom:v:92:y:2025:i:366:p:614-643
    DOI: 10.1111/ecca.12568
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    Cited by:

    1. 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.

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    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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