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Empirical Economics

, Volume 51, Issue 2, pp 809–829 | Cite as

Estimating the income loss of disabled individuals: the case of Spain

  • Maria Cervini-Plá
  • Jose I. SilvaEmail author
  • Judit Vall Castelló
Article

Abstract

In this paper, we present a theoretical model along with an empirical model to identify the effects of disability on wages. From the theoretical model, we derive the hypothesis that only the temporary component of the wage gap, which is due to assimilation costs, will diminish over time, whereas the permanent element, which is due to the productivity loss after the disabling condition, will in fact persist. We test this theoretical hypothesis using an exogenous disability shock (accident) and combine propensity score matching with a difference-in-differences method to account for observed and unobserved time-constant differences. In all our specifications, we find that the reduction in wages for the disabled is between 274 and 308 euros per month, and this represents 19–22 % of the average wage of a disabled worker. This gap, however, is more than offset when we count disability benefits and wages collectively as income. As predicted in the theoretical model, we observe that around 40 % of the initial wage gap between disabled and non-disabled individuals is reversed once the transitory drop in productivity disappears. However, we also observe a constant wage gap that remains over time and that corresponds to the permanent fall in productivity predicted by the theoretical model (60 % of the initial wage gap).

Keywords

Disabled workers Earnings gap Matching techniques 

JEL Classification

I10 J24 J31 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  • Maria Cervini-Plá
    • 1
  • Jose I. Silva
    • 2
    Email author
  • Judit Vall Castelló
    • 3
  1. 1.Universitat Pompeu Fabra & EQUALITASBarcelonaSpain
  2. 2.University of GironaGironaSpain
  3. 3.Centre for Research in Economics and HealthUniversitat Pompeu FabraBarcelonaSpain

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