Award Errors and Permanent Disability Benefits in Spain

There is a controversial debate about the effects of permanent disability benefits on labor market behavior. In this paper we estimate equations for deserving and receiving disability benefits to evaluate the award error as the difference in the probability of receiving and deserving using survey data from Spain. Our results indicate that individuals aged between 55 and 59, self-employers or working in an agricultural sector have a probability of receiving a benefit without deserving it significantly higher than the rest of individuals. We also find evidence of gender discrimination since male have a significantly higher probability of receiving a benefit without deserving it. This seems to confirm that disability benefits are being used as an instrument for exiting the labor market for some individuals approaching the early retirement or those who do not have right to retire early. Taking into account that awarding process depends on Social Security Provincial Department, this means that some departments are applying loosely the disability requirements for granting disability benefits.

Keywords: Disability benefits, Award error, Early retirement, Social security

JEL Classification: H55, J26

Suggested Citation: Suggested Citation

Jimenez-Martin, Sergi and Labeaga Azcona, José Maria and Vilaplana, Cristina, Award Errors and Permanent Disability Benefits in Spain (May 31, 2006). Available at SSRN: https://ssrn.com/abstract=1002306 or http://dx.doi.org/10.2139/ssrn.1002306