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Social Interaction Effects in Disability Pension Participation: Evidence from Plant Downsizing

  • Rege, Mari


    (University of Stavanger)

  • Telle, Kjetil

    (Statistics Norway)

  • Votruba, Mark

    (Case Western Reserve University)

We estimate the magnitude of social interaction effects in disability pension participation among older workers in Norway. Specifically, we investigate how a worker’s propensity to draw disability benefits is affected by a plausibly exogenous shock to the disability entry rate of similarly-aged workers in his or her neighborhood. The problem of omitted variable bias is addressed by employing a novel instrumental variable (IV) strategy, using plant downsizing at neighbors’ plants of employment as an instrument for the disability entry rate among one’s previously employed neighbors. Our IV estimates suggest that a one percentage point increase in the participation rate of previously employed neighbors increased the subsequent 4-year entry rate of workers by about one-half a percentage point. Numerous robustness and specification tests appear to support the validity of the identifying assumption in our IV strategy.

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Paper provided by University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2009/30.

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Length: 53 pages
Date of creation: 30 Jun 2009
Date of revision:
Handle: RePEc:hhs:stavef:2009_030
Contact details of provider: Postal: University of Stavanger, NO-4036 Stavanger, Norway
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