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Why Are So Many Disabled Individuals Not Working in Spain? A Job Search Approach

Author

Listed:
  • Silva, José I.

    () (University of Kent)

  • Vall-Castello, Judit

    () (Universitat Pompeu Fabra)

Abstract

Unlike other disability systems in developed economies, the Spanish system allows partially disabled individuals to work while receiving disability benefits. The puzzle is, however, that employment rates in this group of individuals are very low. The aim of this paper is to understand the incentives and disincentives to work provided by the partial disability scheme in Spain. We first present a theoretical job search model for partially disabled individuals and then estimate a complementary log-log duration model. According to both models, the probability of finding a job falls with the level of disability, the age at which the individual starts receiving disability benefits, and the increase in the local unemployment rate. Moreover, as a result of an increase in the level of disability benefits we find a strong substitution effect that reduces the probability of disabled individuals older than 55 years finding a job to almost zero, in both of the two models. We simulate that the strong substitution effect would be replaced by an equally large income effect even if the increase in the benefits would not be suspended if the individual finds a job.

Suggested Citation

  • Silva, José I. & Vall-Castello, Judit, 2012. "Why Are So Many Disabled Individuals Not Working in Spain? A Job Search Approach," IZA Discussion Papers 6317, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6317
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    References listed on IDEAS

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    1. David H. Autor & Mark G. Duggan & David S. Lyle, 2011. "Battle Scars? The Puzzling Decline in Employment and Rise in Disability Receipt among Vietnam Era Veterans," American Economic Review, American Economic Association, vol. 101(3), pages 339-344, May.
    2. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    3. David H. Autor & Mark G. Duggan, 2006. "The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 71-96, Summer.
    4. Marie, Olivier & Vall Castello, Judit, 2012. "Measuring the (income) effect of disability insurance generosity on labour market participation," Journal of Public Economics, Elsevier, vol. 96(1), pages 198-210.
    5. Vall Castello, Judit, 2012. "Promoting employment of disabled women in Spain; Evaluating a policy," Labour Economics, Elsevier, vol. 19(1), pages 82-91.
    6. David H. Autor & Mark G. Duggan, 2007. "Distinguishing Income from Substitution Effects in Disability Insurance," American Economic Review, American Economic Association, vol. 97(2), pages 119-124, May.
    7. Hugo Benítez-Silva & Frank Heiland, 2007. "The social security earnings test and work incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 26(3), pages 527-555.
    8. John T. Addison & Mário Centeno & Pedro Portugal, 2004. "Key Elasticities in Job Search Theory: International Evidence," Working Papers w200412, Banco de Portugal, Economics and Research Department.
    9. Boyle, Melissa A. & Lahey, Joanna N., 2010. "Health insurance and the labor supply decisions of older workers: Evidence from a U.S. Department of Veterans Affairs expansion," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 467-478, August.
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    Cited by:

    1. repec:eee:labeco:v:48:y:2017:i:c:p:23-34 is not listed on IDEAS
    2. Eva Frutos & Judit Castello, 2015. "Equal health, equal work? The role of disability benefits in employment after controlling for health status," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(3), pages 329-340, April.
    3. Silva, José I. & Vall-Castello, Judit, 2012. "Evaluating the Impact of a Reduction in the Generosity of Disability Benefits: The 2008 Spanish Reform," IZA Discussion Papers 6482, Institute for the Study of Labor (IZA).
    4. Jose I. Silva & Judit Vall-Castello, 2013. "Partial Disability System and Labor Market Adjustment: The Case of Spain," Upjohn Working Papers and Journal Articles 13-201, W.E. Upjohn Institute for Employment Research.

    More about this item

    Keywords

    job search model; disability benefits; duration analysis;

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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