Hiring subsidies for people with a disability: do they work?

Abstract

This article evaluates the effectiveness of hiring subsidies targeted to people with disabilities. By exploiting the timing of implementation among different Spanish regions of a subsidy scheme implemented in Spain during the period 1990–2014, we employed a difference-in-differences approach to estimate the impact of the scheme on the probability of disability insurance (DI) beneficiaries of transiting to employment and on the propensity of individuals of entering the DI program. Our results show that the introduction of the subsidy scheme is in general ineffective at incentivizing transitions to employment, and in some cases it is associated with an increased propensity of transiting to DI. Furthermore, we show that an employment protection component incorporated into the subsidy scheme, consisting in the obligation for the employer to maintain the subsidized worker in employment, is associated with less transitions to permanent employment, more transitions to temporary employment and more transitions to DI, suggesting that these type of employment protection measures can have undesired effects for people with disabilities.

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Notes

  1. 1.

    See [21] for a review of DI participation trends in Spain in the last four decades.

  2. 2.

    Autonomous communities are the 17 regions that conform to the first level of administrative decentralization in Spain

  3. 3.

    There are other studies that evaluate the effect of employment subsidies implemented also in Spain, but they are focused on subsidies targeted to the general population. See, for example, [3, 16, 19].

  4. 4.

    Royal Decree 1327/1981.

  5. 5.

    In this paper, we focus on employment subsidies in the ordinary private market. We do not analyze employment subsidies for disabled individuals that are employed in companies of sheltered employment.

  6. 6.

    The disability certificate is the main administrative recognition of a disability in Spain, and provides access to several rights and services. Individuals are assessed by a technical team, which determines the condition of disability and assigns a degree of severity ranging from 33 to 100%.

  7. 7.

    Figure 4 plots, for every observed quarter, the number of quarters of protection in place taking into account all variation across regions in that particular quarter. It does not show, however, the number of regions implementing them as the aim of the picture is to show the variation of this variable in each quarter during our sample period.

  8. 8.

    For example, in 2014 there are 1178730 individuals included in the CSWL.

  9. 9.

    An individual enters the panel in the moment he/she starts receiving DI benefits.

  10. 10.

    See columns 1 and 2 of Table 2 for descriptive statistics of this sample.

  11. 11.

    See columns 3 and 4 of Table 2 for descriptive statistics of the sample of temporary employees and columns 5 and 6 for descriptive statistics of the sample of non-disabled.

  12. 12.

    The Social Security establishes three degrees of disability according to the reduction in the working capacity lost by the individual as a result of the disability: partial disability, total disability and severe disability. These degrees, in turn, affect the amount of the benefit the individual receives.

  13. 13.

    In Fig. 5b we can see that the transition rate is higher for the Balearic Islands region (IB). This is due to the fact that the islands have additional employment promotion measures specifically targeted to the disabled. However, these additional measures remain constant over time during our sample period and will be captured by the regional fixed effect in our model.

  14. 14.

    Relative risk ratios are the ratios between the probability of transiting to each of the employment alternatives and the probability of remaining in the corresponding employment state (base category). Marginal effects refer to the direct effect on the predicted probability of transiting to the corresponding employment alternative.

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Acknowledgements

We gratefully acknowledge financial support from Recercaixa for the 2014 project “Promoting the labour market integration of disabled workers: A policy evaluation exercise for Spain” and from the Spanish Ministry of Economy grants ECO2014-52238-R and ECO2017-83668-R. We thank seminar participants at CRES, Pompeu Fabra University, FEDEA, UNED, the Recercaixa-CRES Workshop on Disability Topics, the XXXVI Conference of the Spanish Health Economics Association and the Third EuHEA PhD Conference for their useful comments.

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Correspondence to Judit Vall Castelló.

Appendix

Appendix

See Tables 6, 7, 8, 9, 10 here.

Table 6 Effect of hiring subsidies on transitions to employment, by age group
Table 7 Effect of hiring subsidies on transitions to employment, by gender
Table 8 Effect of hiring subsidies on transition to disability insurance, by age group
Table 9 Effect of hiring subsidies on transition to disability insurance, by gender
Table 10 Effect of hiring subsidies on transitions to employment, Placebo estimates

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Jiménez-Martín, S., Juanmartí Mestres, A. & Vall Castelló, J. Hiring subsidies for people with a disability: do they work?. Eur J Health Econ 20, 669–689 (2019). https://doi.org/10.1007/s10198-019-01030-9

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Keywords

  • Disability
  • Employment subsidies
  • Labor market transitions
  • Disability insurance
  • Difference-in-differences

JEL Classification

  • H24
  • H55
  • J08
  • J14