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Disability Risk, Disability Benefits, and Equilibrium Unemployment

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  • Ed Westerhout

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Abstract

This paper analyses the labour market and efficiency effects of various kinds of disability policies. It therefore extends Pissarides (1990) model of equilibrium unemployment with disability risk and disability benefits and allows for the improper use of disability schemes by the unemployed. The paper finds that recognition of this improper use can reverse the ranking of policies. In addition, it concludes that disability policies that reduce the participation in disability schemes tend to increase the rate of official unemployment. Only policies that lower the rate of disability shocks succeed to reduce both the participation in disability and unemployment schemes. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Ed Westerhout, 2001. "Disability Risk, Disability Benefits, and Equilibrium Unemployment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(3), pages 219-244, May.
  • Handle: RePEc:kap:itaxpf:v:8:y:2001:i:3:p:219-244
    DOI: 10.1023/A:1011294105317
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    References listed on IDEAS

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    1. Haveman, Robert H. & Wolfe, Barbara L., 1984. "Disability transfers and early retirement: a casual relationship?," Journal of Public Economics, Elsevier, vol. 24(1), pages 47-66, June.
    2. Parsons, Donald O, 1980. "The Decline in Male Labor Force Participation," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 117-134, February.
    3. Hassink, R. & van Ours, J.C. & Ridder, G., 1997. "Dismissal through disability," Other publications TiSEM b756763d-1536-4d61-84e4-9, Tilburg University, School of Economics and Management.
    4. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 457-475.
    5. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-1035, December.
    6. Parsons, Donald O, 1982. "The Male Labour Force Participation Decision: Health, Reported Health, and Economic Incentives," Economica, London School of Economics and Political Science, vol. 49(193), pages 81-91, February.
    7. Doherty, N A, 1979. "National Insurance and Absence from Work," Economic Journal, Royal Economic Society, vol. 89(353), pages 50-65, March.
    8. van Ours, J. C., 1991. "The efficiency of the Dutch labour market in matching unemployment and vacancies," Other publications TiSEM 4bbea82e-68fb-45e0-b32a-3, Tilburg University, School of Economics and Management.
    9. Haveman, Robert & Wolfe, Barbara & Warlick, Jennifer, 1988. "Labor market behavior of older men : Estimates from a Trichotomous choice model," Journal of Public Economics, Elsevier, vol. 36(2), pages 153-175, July.
    10. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
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    Cited by:

    1. van Sonsbeek, J.M. & Gradus, R.H.J.M., 2006. "A microsimulation analysis of the 2006 regime change in the Dutch disability scheme," Economic Modelling, Elsevier, vol. 23(3), pages 427-456, May.
    2. Paul Frijters & Michael A. Shields, 2001. "Welfare And Output Enhancing Moral Hazard:Disability Benefits And Endogenous Occupational Choice," Paul Frijters Discussion Papers 2001-1, School of Economics and Finance, Queensland University of Technology.
    3. Gijs Roelofs & Daniel Vuuren, 2017. "The Decentralization of Social Assistance and the Rise of Disability Insurance Enrolment," De Economist, Springer, vol. 165(1), pages 1-21, March.

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