Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192478 
Year of Publication: 
2007
Series/Report no.: 
Discussion Papers No. 496
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
We estimate the magnitude of social interaction effects in disability pension participation among older workers in Norway. Specifically, we investigate how a worker's propensity to draw disability benefits is affected by a plausibly exogenous shock to the disability entry rate of similarly-aged workers in his or her neighborhood. The problem of omitted variable bias is addressed by employing a novel instrumental variable (IV) strategy, using plant downsizing at neighbors' plants of employment as an instrument for the disability entry rate among one's previously employed neighbors. Our IV estimates suggest that a one percentage point increase in the participation rate of previously employed neighbors increased the subsequent 4-year entry rate of workers by about one-half a percentage point. Numerous robustness and specification tests appear to support the validity of the identifying assumption in our IV strategy.
Subjects: 
disability
downsizing
layoffs
plant closings
social insurance
social interaction
welfare norms
JEL: 
H55
I12
I38
J63
J65
Document Type: 
Working Paper

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