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Measuring the Effects of Employment Protection Policies for the Disabled: Theory and Evidence from the Americans with Disabilities Act

Author

Listed:
  • Serena Rhee

    (Department of Economics, University of Hawaii)

  • Soojin Kim

    (Purdue University)

Abstract

We evaluate the Americans with Disabilities Act(ADA) using a directed search model in which firms post health-contingent wage contracts. We theoretically show that the ADA benefits disabled workers at the expense of non-disabled workers if firms face a high penalty for preferentially hiring non-disabled, whereas the disabled are worse off if the expected cost from terminating a disabled employee is high. Our estimation results imply that disabled job-finding and job-separation rates decreased, suggesting that for firms, the cost of hiring discrimination is lower than disabled worker termination. Overall, the ADA caused a 2:2 percentage point decline in disabled employment rates.

Suggested Citation

  • Serena Rhee & Soojin Kim, 2016. "Measuring the Effects of Employment Protection Policies for the Disabled: Theory and Evidence from the Americans with Disabilities Act," Working Papers 201621, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201621
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    Cited by:

    1. Naoki Aizawa & Soojin Kim & Serena Rhee, 2020. "Labor Market Screening and the Design of Social Insurance: An Equilibrium Analysis of the Labor Market for the Disabled," NBER Working Papers 27478, National Bureau of Economic Research, Inc.
    2. Timpe, Brenden, 2024. "The labor market impacts of America’s first paid maternity leave policy," Journal of Public Economics, Elsevier, vol. 231(C).
    3. Ding Liu & Daniel L. Millimet, 2021. "Bounding the joint distribution of disability and employment with misclassification," Health Economics, John Wiley & Sons, Ltd., vol. 30(7), pages 1628-1647, July.
    4. Derbyshire, Daniel W. & Jeanes, Emma & Khedmati Morasae, Esmaeil & Reh, Susan & Rogers, Morwenna, 2024. "Employer-focused interventions targeting disability employment: A systematic review," Social Science & Medicine, Elsevier, vol. 347(C).
    5. 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.
    6. Simonetti, Irene & Belloni, Michele & Farina, Elena & Zantomio, Francesca, 2022. "Labour market institutions and long term adjustments to health shocks: Evidence from Italian administrative records," Labour Economics, Elsevier, vol. 79(C).
    7. Du, Yao & Chan, Chia-Ying & Lin, Chih-Yung & Lu, Chien-Lin, 2023. "Charitable CEOs and employee protection," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).

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    More about this item

    Keywords

    Americans with Disabilities Act; employment protection; search friction; wage posting; job-finding rate;
    All these keywords.

    JEL classification:

    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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