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Partial disability and labor market adjustment: The case of Spain

Author

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  • Silva, José I.
  • Vall-Castelló, Judit
Abstract
Although partially disabled individuals in Spain are allowed to combine disability benefits with a job, the empirical evidence shows that the employment rate of this group of individuals is very low because they have much lower job finding and higher job separation rates than nondisabled workers. Moreover, a decomposition analysis of the equilibrium employment rate shows that the differences in the job finding rates explain 85 percent of the disabled employment gap. To explain these facts, we construct a labor market model with search intensity and matching frictions to identify the incentives and disincentives to work in Spain from the point of view of both disabled workers and employers. According to the model, the high employment rate gap observed between nondisabled and disabled individuals can be partly explained by the presence of a lower level of productivity among disabled individuals that discourages them from looking for jobs. In terms of policy interventions, sensitivity analysis shows that, since the disability condition is permanent, one-off subsidies in new hired positions have a much lower impact on the employment rate and welfare of disabled individuals than long-term policies.

Suggested Citation

  • Silva, José I. & Vall-Castelló, Judit, 2017. "Partial disability and labor market adjustment: The case of Spain," Labour Economics, Elsevier, vol. 48(C), pages 23-34.
    • Handle: RePEc:eee:labeco:v:48:y:2017:i:c:p:23-34
    DOI: 10.1016/j.labeco.2017.05.012
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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. repec:wop:calsdi:97-23 is not listed on IDEAS
    3. 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.
    4. 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 of Labor Economics (IZA).
    5. Hector Sala & José I. Silva & Manuel Toledo, 2012. "Flexibility at the Margin and Labor Market Volatility in OECD Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 991-1017, September.
    6. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
    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. Vall Castello, Judit, 2012. "Promoting employment of disabled women in Spain; Evaluating a policy," Labour Economics, Elsevier, vol. 19(1), pages 82-91.
    9. 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.
    10. 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.
    11. H. Benitez-Silva & F. Heiland, 2008. "Early claiming of social security benefits and labour supply behaviour of older Americans," Applied Economics, Taylor & Francis Journals, vol. 40(23), pages 2969-2985.
    12. Miguel Á. MALO & Ricardo PAGÁN, 2012. "Wage differentials and disability across Europe: Discrimination and/or lower productivity?," International Labour Review, International Labour Organization, vol. 151(1-2), pages 43-60, June.
    13. Maria Cervini-Plá & Jose I. Silva & Judit Vall Castelló, 2016. "Estimating the income loss of disabled individuals: the case of Spain," Empirical Economics, Springer, vol. 51(2), pages 809-829, September.
    14. José Silva & Javier Vázquez-Grenno, 2011. "The ins and outs of unemployment and the assimilation of recent immigrants in Spain," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1309-1330, October.
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    Cited by:

    1. Thomas Barnay & Éric Defebvre, 2021. "Working conditions and disabilities in French workers: a career-long retrospective study," Erudite Working Paper 2021-14, Erudite.
    2. Judit Krekó, 2019. "Effect of employment tax incentives: the case of disability quota in Hungary," CEU Working Papers 2019_1, Department of Economics, Central European University.
    3. Krekó, Judit & Telegdy, Álmos, 2022. "The Effects of a Disability Employment Quota When Compliance Is Cheaper than Defiance," IZA Discussion Papers 15726, Institute of Labor Economics (IZA).
    4. Justine Bondoux & Thomas Barnay & Thomas Renaud & Florence Jusot, 2021. "How Does Disability Affect Income? An Empirical Study on Older European Workers," Erudite Working Paper 2021-05, Erudite.
    5. Cámara Angeles & Martínez Mª Isabel & Santero-Sánchez Rosa, 2020. "Macroeconomic cost of excluding persons with disabilities from the workforce in Spain," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-21, March.
    6. Matthew J. Hill & Jose I. Silva & Judit Vall Castello, 2019. "Act now: The effects of the 2008 Spanish disability reform," Health Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 906-920, July.

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    More about this item

    Keywords

    Disability system; Job search intensity; Job flow analysis;
    All these keywords.

    JEL classification:

    • 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
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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