Does a Boom in the Local Labor Market Reduce Disability Pensioning Up-Take?

Abstract

Previous research on the relationship between shocks in the local labor market and disability pensioning has shown that negative shocks, such as plant closures, have led to increases in disability up-takes. One interpretation of these findings is that there is a pool of workers for which disability pension is possible, but only utilized if the local labor market is difficult. In this paper we exploit the development of the Snow White gas field — which led to a boom in the local labor market in the Norwegian county of Hammerfest — to examine the impact of a positive local labor market shock. Employment and wages increased in Hammerfest during the development period and disability pensioning decreased at the end of the period. The effects on employment and disability pensioning are however purely driven by people moving to Hammerfest in response to the shock.

Keywords: Labor demand shock, local labor markets, disability pension

JEL Classification: I3, J2, J61, J62