Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/58872 
Year of Publication: 
2012
Series/Report no.: 
IZA Discussion Papers No. 6317
Publisher: 
Institute for the Study of Labor (IZA), Bonn
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.
Subjects: 
disability benefits
job search model
duration analysis
JEL: 
C41
I18
J64
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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