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Estimating the Income Loss of Disabled Individuals: The Case of Spain

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  • Cervini-Plá, María

    () (Universitat de Girona)

  • Silva, José I.

    () (University of Kent)

  • Vall-Castello, Judit

    () (Universitat Pompeu Fabra)

Abstract

In this paper, we present both a theoretical and an empirical model in order to identify the effects of disability on wages. In the theoretical model we assume that the wage gap of a disabled worker depends on a permanent and a transitory productivity gap and the model predicts that the wage gap will be lower after gaining some work experience in the new job. We test this theoretical hypothesis using an exogenous health shock and matching methods associated with treatment effect techniques for policy evaluation. In all our specifications, we find that the reduction of the wage for the disabled is between 293 and 342 euros per month expressed in constant terms at 2010 prices (21-24% of the average wage of disabled workers) but this reduction is more than offset when we take into account both the disability benefits and the wage. As predicted in the theoretical model, we observe that the pay gap between the disabled and the non-disabled individuals falls over time once the transitory drop in productivity is disappearing. However, we observe a constant wage gap that remains over time and that corresponds to the permanent fall in productivity predicted by the theoretical model.

Suggested Citation

  • Cervini-Plá, María & Silva, José I. & Vall-Castello, Judit, 2012. "Estimating the Income Loss of Disabled Individuals: The Case of Spain," IZA Discussion Papers 6752, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6752
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    References listed on IDEAS

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    1. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
    2. (*), Nigel Rice & Paul Contoyannis, 2001. "The impact of health on wages: Evidence from the British Household Panel Survey," Empirical Economics, Springer, vol. 26(4), pages 599-622.
    3. Wu, Stephen, 2001. "Adapting to heart conditions: a test of the hedonic treadmill," Journal of Health Economics, Elsevier, vol. 20(4), pages 495-507, July.
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    5. Richard Blundell & Monica Costa Dias, 2009. "Alternative Approaches to Evaluation in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 44(3).
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    11. Alberto Abadie & Guido W. Imbens, 2002. "Simple and Bias-Corrected Matching Estimators for Average Treatment Effects," NBER Technical Working Papers 0283, National Bureau of Economic Research, Inc.
    12. Kerwin Kofi Charles, 2003. "The Longitudinal Structure of Earnings Losses among Work-Limited Disabled Workers," Journal of Human Resources, University of Wisconsin Press, vol. 38(3).
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    14. Michael Lechner & Rosalia Vazquez-Alvarez, 2011. "The effect of disability on labour market outcomes in Germany," Applied Economics, Taylor & Francis Journals, vol. 43(4), pages 389-412.
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    17. Pilar García-Gómez & Hans van Kippersluis & Owen O’Donnell & Eddy van Doorslaer, 2013. "Long-Term and Spillover Effects of Health Shocks on Employment and Income," Journal of Human Resources, University of Wisconsin Press, vol. 48(4), pages 873-909.
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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. Demianova, Anna & Lukiyanova, Anna, 2016. "The impact of disability status on labor supply in Russia," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 44, pages 50-74.
    3. 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.
    4. Begoña Cueto & Miguel A. Malo, 2016. "Do Partial Disability Pensions Close the Earnings Gap?," Hacienda Pública Española, IEF, vol. 216(1), pages 103-126, March.
    5. 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.
    6. Cervini-Plá, María & Vall-Castello, Judit, 2015. "The Earnings and Employment Losses Before Entering the Disability System," IZA Discussion Papers 8913, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    disabled workers; earnings gap; matching techniques;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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