How Does Disability Affect Incomes? An Empirical Study on Older European Workers

Justine Bondoux, Thomas Barnay, Florence Jusot and Thomas Renaud

Annals of Economics and Statistics, 2025, issue 158, 45-80

Abstract: This paper studies the impact of the onset of disability on personal income. Using the Survey of Health, Ageing and Retirement in Europe, we compare income trajectories of individuals who experience disability with those who remain healthy over the same period. We hypothesize that the onset of disability reduces overall personal income, as the loss in wages is not fully compensated by disability-related benefits. To identify the causal impact, we combine a difference-in-differences approach with kernel propensity score matching, controlling for both observable and time-invariant unobservable individual characteristics. Our results confirm this hypothesis, showing a substantial decrease in personal income driven primarily by reduced wages. We further investigate heterogeneous effects by gender and the generosity of social welfare systems, showing that more generous welfare states mitigate income losses due to disability.

Keywords: Disability; Income; Personal Income; Wages; Compensation Incomes; Disability Insurance Benefits; Kernel Matching; Weighted Difference-in-Differences. (search for similar items in EconPapers)
JEL-codes: C31 C33 D31 J14 J31 J33 (search for similar items in EconPapers)
Date: 2025
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Related works:
Working Paper: How Does Disability Affect Incomes? An Empirical Study on Older European Workers (2025)
Working Paper: How Does Disability Affect Income? An Empirical Study on Older European Workers (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2025:i:158:p:45-80

DOI: 10.2307/48845128

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