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Health, disability insurance and labour force participation

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  • Brian Bell
  • James Smith

Abstract

Over half a million men of working age left the labour market over the course of the 1990s. In this paper this remarkable decline is explored, and the roles played by the interaction of skills, long-term sickness and the disability benefit system are highlighted. The analysis shows that the decline in participation was almost exclusively among unskilled males and that this same group reported increasing long-term illness. The generosity of the disability insurance system relative to that of the unemployment insurance appears to have encouraged such workers to exit the labour market. Strong evidence is presented of sizable labour supply responses to disability insurance benefits, which would support that hypothesis. But it seems unlikely that this 1990s' experience will be repeated as disability benefits are now much less generous than they were at that time.

Suggested Citation

  • Brian Bell & James Smith, 2004. "Health, disability insurance and labour force participation," Bank of England working papers 218, Bank of England.
  • Handle: RePEc:boe:boeewp:218
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    File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2004/WP218.pdf
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    References listed on IDEAS

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    1. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    2. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
    3. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
    4. Brian Bell & James Smith, 2002. "On gross worker flows in the United Kingdom: evidence from the Labour Force Survey," Bank of England working papers 160, Bank of England.
    5. Bound, John, 1989. "The Health and Earnings of Rejected Disability Insurance Applicants," American Economic Review, American Economic Association, vol. 79(3), pages 482-503, June.
    6. Darius Lakdawalla & Dana Goldman & Jay Bhattacharya, 2001. "Are the Young Becoming More Disabled?," NBER Working Papers 8247, National Bureau of Economic Research, Inc.
    7. Richard Blundell & Paul Johnson, 1997. "Pensions and Retirement in the UK," NBER Working Papers 6154, National Bureau of Economic Research, Inc.
    8. John Bound & Timothy Waidmann, 1992. "Disability Transfers, Self-Reported Health, and the Labor Force Attachment of Older Men: Evidence from the Historical Record," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1393-1419.
    9. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-308, May.
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    Cited by:

    1. Christina Beatty & Stephen Fothergill, 2005. "The diversion from 'unemployment' to 'sickness' across British regions and districts," Regional Studies, Taylor & Francis Journals, vol. 39(7), pages 837-854.
    2. Morten Nordberg, 2008. "Employment Behaviour of Marginal Workers: The Roles of Preferences and Opportunities," LABOUR, CEIS, vol. 22(3), pages 411-445, September.
    3. Maria Guti'rrez-DomSnech & Brian Bell, 2004. "Female labour force participation in the United Kingdom: evolving characteristics or changing behaviour?," Bank of England working papers 221, Bank of England.
    4. Nordberg, Morten, 2007. "Employment behaviour of marginal workers," Memorandum 06/2007, Oslo University, Department of Economics.
    5. Faggio, Giulia & Nickell, Stephen, 2005. "Inactivity among prime age men in the UK," LSE Research Online Documents on Economics 19912, London School of Economics and Political Science, LSE Library.
    6. Duncan McVicar & Michael Anyadike-Danes, 2010. "Panel estimates of the determinants of British regional male incapacity benefits rolls 1998-2006," Applied Economics, Taylor & Francis Journals, vol. 42(26), pages 3335-3349.
    7. Maja Prudzienica, 2012. "Disabled Persons on Labour Market - Analysis of Solutions in Poland and Selected EU Countries," MIC 2012: Managing Transformation with Creativity; Proceedings of the 13th International Conference, Budapest, 22–24 November 2012 [Selected Papers], University of Primorska, Faculty of Management Koper.
    8. Mark Schweitzer & David Tinsley, 2004. "The UK labour force participation rate: business cycle and trend influences," Bank of England working papers 228, Bank of England.
    9. Danacica, Daniela Emanuela & Cirnu, Doru, 2014. "Unemployment Duration and Exit States of Disabled People in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 35-52, March.

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