School of Economics

2015 Discussion papers

School of Economics Discussion Paper 15/12

Act Now: The Effects of the
2008 Spanish Disability Reform

Matthew J. Hill, Jose Silva and Judit Vall
UCLA and RAND, Universitat de Girona and University of Kent, Pompeu Fabra University

July 2015


We evaluate the effects of a reduction in the generosity of the Spanish disability system (DI) implemented in 2008. The reform reduced the benefits for individuals that have a short contributory history relative to their age, theoretically discouraging potential applicants to disability. However, due to the method used to calculate the extent of lost benefits, the reform actually introduced an incentive for individuals to apply for disability now. We use a life-cycle model with heterogeneous disabled workers to understand the potential impact of the reform and confirm the predictions of the model empirically. Our estimates show that the reform increased the probability of applying to DI by 33% for men. Consistent with the theoretical model, the effect is much stronger for individuals that lost their job in the previous period (83%).

JEL Classification: C33; I18; H51

Keywords: disability benefits; life-cycle model; policy evaluation

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Last Updated: 13/07/2015