Paper #1519

Title:

Great Recession and disability insurance in Spain

Authors:

Sergi Jiménez-Martín, Arnau Juanmarti Mestres and Judit Vall Castelló

Date:

October 2016 (Revised: April 2017)

Abstract:

In this paper, we exploit the strong incidence of the Great Recession in Spain to estimate the effect of economic conditions on participation in Disability Insurance (DI). Using individual panel data, we show that increases in the local unemployment rate are associated with a reduction in the individual probability to enter the DI program during the Great Recession in Spain. Using aggregate data on applications, we show that this procyclical behavior of DI awards comes from an increase in the proportion of applications that are denied. Thus, contrary to the previous literature that has extensively reported a countercyclical behavior of DI participation, our results provide new evidence that, in periods of extremely recessionary conditions, DI participation may turn procyclical.

Keywords:

Disability, Great Recession, labour market transitions

JEL codes:

H55, I10, J14.

Area of Research:

Labour, Public, Development and Health Economics / Statistics, Econometrics and Quantitative Methods

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