Partial Disability System and Labor Market Adjustment: The Case of Spain

Upjohn Institute Working Paper No. 13-201

45 Pages Posted: 9 Aug 2013

See all articles by Jose Silva

Jose Silva

University of Kent - Canterbury Campus; University of Girona

Judit Vall Castelló

Universitat Pompeu Fabra - Center for Research in Health and Economics (CRES)

Date Written: July 2013

Abstract

Although partially disabled individuals in Spain are allowed to combine the receipt of disability benefits with a job, the empirical evidence shows that employment rates for this group of individuals are very low. Therefore, in this paper we construct labor market model with search intensity and matching frictions in order to identify the incentives and disincentives to work provided by the partial disability system in Spain from the point of view of both disabled individuals and employers. According to the model, the high employment rate gap observed between non-disabled and disabled workers can be partially explained by the presence of a lower level of productivity and higher searching costs among disabled individuals that discourage them from looking for jobs. Moreover, the design of the Spanish Disability System also contributes in explaining this gap. We also analyze the role of business cycle conditions in shaping the labor market transitions of disabled individuals.

Keywords: disability system, job search intensity, flow analysis

JEL Classification: I18, J64, J68

Suggested Citation

Silva, Jose and Castelló, Judit Vall, Partial Disability System and Labor Market Adjustment: The Case of Spain (July 2013). Upjohn Institute Working Paper No. 13-201, Available at SSRN: https://ssrn.com/abstract=2307638 or http://dx.doi.org/10.2139/ssrn.2307638

Jose Silva (Contact Author)

University of Kent - Canterbury Campus ( email )

School of Politics and International Relations
Rutherford College
Canterbury, CT2 7NX

University of Girona ( email )

Girona, 17071
Spain

Judit Vall Castelló

Universitat Pompeu Fabra - Center for Research in Health and Economics (CRES) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

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