Labor Supply and Wages over the Life Cycle: Human Capital and Disability Benefits

Richard Blundell, Monica Costa-Dias, Graham Mazeine, Costas Meghir and Tom Waters

No 35861, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Work experience has been found to be a key determinant of work and wages for educated women, but it seems to play a smaller role for the less educated. For them, welfare, tax credits and family composition matter more, and increasingly so does participation in disability programmes. Here we document how labor supply, wages, health, and disability claims have evolved in the UK over the last three decades, and examine how reforms to tax credits, disability benefits and other welfare programs have changed work incentives over this period. We then introduce these features into an empirical dynamic structural model of life-cycle labor supply, human capital and disability benefit application, in which human capital combines health capital, experience accumulated in work, and education. Estimating the model on a panel of working-age women in the UK, we examine the interactions between experience capital and health capital in driving life-cycle earnings across different education groups. Our results highlight the importance of interactions in the disability benefit, welfare and tax-credit systems for understanding the life cycle pattern of hours, employment, earnings, and disability claims, and for evaluating policy counterfactuals.

JEL-codes: D15 D31 H24 H31 I14 I3 J14 J22 J31 (search for similar items in EconPapers)
Date: 2026-10
New Economics Papers: this item is included in nep-dge, nep-lma, nep-ltv and nep-mid
Note: LS PE
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Working Paper: Labor Supply and Wages over the Life Cycle: Human Capital and Disability Benefits* (2026)
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