Paper #1563

Title:

Hiring subsidies for people with disabilities: Do they work?

Authors:

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

Date:

April 2017

Abstract:

This article evaluates the effectiveness of hiring subsidies targeted to people with disabilities. By exploiting the timing of implementation among the different Spanish regions of a subsidy scheme implemented in Spain during the period 1990-2014, we employ a differencesin- differences approach to estimate the impact of the scheme on the probability of 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 to 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.

Keywords:

Disability, employment subsidies, labor market transitions, disability insurance, differences-in-differences.

JEL codes:

H24, H55, J08, J14

Area of Research:

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

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