Volume 24, Number 3 (Summer) 1989
Stern, Steven. 1989. "Measuring the Effect of Disability on Labor Force Participation." Journal of Human Resources 24(3):361-395.
This paper estimates the effect of disability on labor force participation by using symptoms or diseases as instruments in a simultaneous equations model of endogenous reported disability and labor force participation. The results show that each measure of disability explains a significant amount of variation in labor force participation, though the two are not perfect substitutes. There is only weak evidence of endogeneity of the disability variables. For causes where there is evidence of endogeneity, the bias it causes has the opposite effect of that hypothesized in the literature (i.e., stress causes health to deteriorate with labor force participation). Furthermore, it has only insignificant effects on the coefficients for other variables.
The author is a professor of economics at the University of Virginia. He would like to thank Sandra Stern, Philip Feldman, Jeff Zabel, John Bound, Jon Skinner, Ed Olsen, participants of the Public Economics Workshop at the University of Virginia, and an anonymous referee for valuable suggestions, Debbie Mullin for careful and timely research assistance and Peggy Claytor for excellent typing. He takes responsibility for all remaining errors. The project was funded by the National Institute for Aging, Grant No. 5-R29-AG06387-03.
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