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Award errors and permanent disability benefits in Spain

  • Sergi Jimenez-Martin
  • Jose M. Labeaga
  • Cristina Vilaplana Prieto

In this paper we estimate equations for deserving or "true disability indicator" and receiv- ing disability benefits to evaluate the award error as the difference between both probabilities using survey data from Spain. As expected award errors are not randomly distributed across the population. We find that individuals aged between 55 and 59, self-employed, working in an agricultural sector or living in a depressed region, have a significantly higher probability of receiving a benefit without deserving than the rest of individuals. We also find evidence of gender discrimination since males have a significantly higher probability of receiving a benefit without deserving it. Finally we show that the probability of getting a benefit being healthy is not distributed at random across the population. We have estimated the cost of wrongful benefit concession at a minimum of 1500 million euros or 0,2 percent of the Spanish GDP for year 2000. All these findings confirm that disability benefits are being used as an instrument for exiting the labor market for individuals approaching the early retirement age. Since the awarding process depends on Social Security Regional offices, this implies that some regional offices are applying loosely the requirements for granting disability benefits.

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Paper provided by HEDG, c/o Department of Economics, University of York in its series Health, Econometrics and Data Group (HEDG) Working Papers with number 07/04.

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Date of creation: Apr 2007
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Handle: RePEc:yor:hectdg:07/04
Contact details of provider: Postal: HEDG/HERC, Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
Fax: (0)1904 323759
Web page: http://www.york.ac.uk/economics/postgrad/herc/hedg/Email:


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