Electronic Thesis and Dissertation Repository

Thesis Format

Integrated Article

Degree

Doctor of Philosophy

Program

Economics

Supervisor

Bowlus, Audra

Abstract

My dissertation consists of three chapters about the effects of disability and disability policy.

The second chapter analyzes the variation in labour market outcomes across disabilities by representing disability as a bundle of characteristics. Rich with information on the characteristics of a disabling condition, I use the Participation and Activity Limitation Survey to compare the relative importance of each {characteristic} and their interactions on employment, wages, hours worked, and annual employment income. The disability {characteristics} include the type of activity limitation, number of limitations, timing of onset, severity, and persistence. I find substantial cross-sectional variation in labour supply, wages, and annual earnings across the activity limitations. Severity is most predictive of labour supply, while persistence/ duration of disability is predictive of all outcomes. Cognitive types of disabilities have more impact on wages than physical. Lastly, I find the timing of onset has important implications for wages and annual income. My results are consistent with disabilities that onset by age eighteen inflicting additional wage penalties through reduced skill accumulation.

The third chapter uses Canadian survey and administrative tax data to estimate the effect of disability types in the ten years after onset on the level and composition of personal income. I distinguish disability types based on reported limitations to daily activities and group them into physical, cognitive, or concurrent (both). I find substantial heterogeneity in the effect on personal income across types. Following onset, people with cognitive disabilities experience larger and more permanent declines in employment and market income than those with physical disabilities. Those with cognitive disabilities receive similar increases in total government transfers and fewer transfers from programs designed for disability. Instead, this group offsets some of the decline in market income with transfer programs that target families. Finally, the estimated effect of concurrent disabilities on market income and government transfers appears to be additive as it equals the sum of the effects of physical and cognitive disabilities.

The fourth chapter observes that individuals with an early-onset (before age 18) disability attain less education than their non-disabled counterparts. This equates to an eighteen percentage point gap in post-secondary attainment between these populations in Canada. This gap relates to how disability affects the cost and return to investing in education and the availability of additional income through social insurance. I build and estimate a structural life-cycle model of education and labour market choices to analyze the effect of social insurance on education investments for early-onset individuals. I focus on two social insurance policies in Canada: social assistance (SA) and disability insurance (DI). Using linked Canadian survey and administrative tax data to estimate the model, I reproduce the education gap, life-cycle employment rates, and attachment to SA and DI. I find the effect of disability on the accumulation of human capital accounts for two-thirds of the education gap. However, 18.6\% of the gap is related to disincentives from social insurance policies, mainly from added benefits in SA available for beneficiaries with disabilities. Through counterfactual experiments, I find decreasing the value of SA poses an insurance-incentive trade-off for early-onset individuals. Instead, post-secondary grants for early-onset individuals increase their educational attainment, employment, and improves welfare. Moreover, this policy helps pay for itself through added tax revenues and reduced dependence on SA.

Summary for Lay Audience

The chapters in my doctoral thesis focus on work-limiting disability and its effect on labour market behaviour. The second chapter accounts for differences in the characteristics of disabling conditions to understand the variation in its impact on outcomes in the labour market. This chapter uses rich survey data that contains measurements of disability severity, the duration of the disability, the type of activities that are limited, and the age of the disability onset. I analyze the relationship between these characteristics on employment, hourly wages, hours worked, and annual employment income. I find certain characteristics to be more relevant for certain outcomes. Notably, severity matters most for employment and hours worked, whereas the timing of onset is more relevant for wages and annual employment income.

The third chapter is motivated by the significance of a disabilities duration on annual earnings from the second chapter. The effect of disability may change over time as people adapt or conditions improve or worsen. I compare the change in components of personal income in the ten years following onset for different types of disabilities. On the one hand, cognitive disability results in more significant declines in personal income in the years after it onsets compared to physical disabilities. On the other hand, the rise in government transfers designed for people affected by disability increases by less for individuals affected by a cognitive disability relative to physical.

The final chapter considers individuals with an early onset disability and the determinants of their post-secondary education choices. The timing of this population's disability means it will be present and accounted for when they make their education decisions, which results in an eighteen percentage point gap in post-secondary completion. I build a statistical model to analyze the factors underlying this post-secondary education gap. I find that factors related to human capital account for approximately two-thirds of the education gap. However, I also find that social insurance policies that provide income assistance to disabled individuals create disincentives for enrolling in post-secondary school. The disincentive from social insurance policies accounts for 18.6% of the education gap.

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