Measuring the Effects of Employment Protection Policies for the Disabled: Theory and Evidence from the Americans with Disabilities Act

Serena Rhee and Soojin Kim

No 201621, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: We evaluate the Americans with Disabilities Act(ADA) using a directed search model in which firms post health-contingent wage contracts. We theoretically show that the ADA benefits disabled workers at the expense of non-disabled workers if firms face a high penalty for preferentially hiring non-disabled, whereas the disabled are worse off if the expected cost from terminating a disabled employee is high. Our estimation results imply that disabled job-finding and job-separation rates decreased, suggesting that for firms, the cost of hiring discrimination is lower than disabled worker termination. Overall, the ADA caused a 2:2 percentage point decline in disabled employment rates.

Keywords: Americans with Disabilities Act; employment protection; search friction; wage posting; job-finding rate (search for similar items in EconPapers)
JEL-codes: J64 J68 J78 K31 (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-dge, nep-lab and nep-law
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http://www.economics.hawaii.edu/research/workingpapers/WP_16-21.pdf First version, 2016 10 (application/pdf)

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Journal Article: Measuring the effects of employment protection policies: Theory and evidence from the Americans with Disabilities Act (2018)
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