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Severity of Work Disability and Work

  • Umut Oguzoglu


    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

At any given time, individuals may be subject to health shocks whose impact on work capacity can vary in magnitude. Therefore the variation in severity levels can explain changes in labour force decisions that can not be picked up by the general disability status alone. This paper analyses the effect of severity of disability on labour force participation by using two measures of severity: the self-reported work limitation scales and the SF-36 physical component summary scores. Using five waves of the Household, Income and Labour Dynamics in Australia Survey, several static and dynamic panel data models are estimated to account for state dependence and unobserved heterogeneity in participation. The results suggest that differences in severity levels explain a significant portion of the variance in the participation rates among disabled individuals. It is also found that severe work limitations have a more immediate impact on individuals’ labour force outcomes. Moreover, the disabilities are shown to have longer lasting adverse effects on female participation.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2007n30.

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Length: 26 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:iae:iaewps:wp2007n30
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
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  1. 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.
  2. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  3. John Bound & Michael Schoenbaum & Timothy Waidmann, 1995. "Race and Education Differences in Disability Status and Labor Force Attachment," NBER Working Papers 5159, National Bureau of Economic Research, Inc.
  4. Nicole Watson & Mark Wooden, 2004. "The HILDA Survey Four Years On," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(3), pages 343-349, 09.
  5. Paul L. Latreille, 2009. "Disability, Health and the Labour Market: Evidence from the Welsh Health Survey," Local Economy, London South Bank University, vol. 24(3), pages 192-210, May.
  6. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  7. John Bound, 1991. "Self-Reported Versus Objective Measures of Health in Retirement Models," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 106-138.
  8. Owen O'Donnell, 1998. "The Effect of Disability on Employment Allowing for Work Incapacity," Studies in Economics 9813, School of Economics, University of Kent.
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