Working Paper

Employment and Welfare Effects of the Quota for Disabled Workers in Brazil

Abstract: I study the effect of a quota for disabled workers on the labor market and on welfare. Using a task-based model, I show that the effect of a quota will depend on the productivity of disabled workers and their labor supply elasticity. I estimate the productivity of disabled workers using variation from inspections of the quota. I find that the quota increased the hiring of disabled workers, but it reduced wages and employment of non-disabled workers, suggesting that the quota reduced firms’ productivity. I estimate the labor supply elasticity of disabled workers using heterogeneous exposure across regions. Using the model calibrated to the empirical estimates, I find that the quota for disabled workers decreased welfare by 0.33% and forced the government to increase marginal taxes. However, alternatively, a subsidy for disabled workers could increase welfare.

Keywords: quota for disabled workers; disability insurance; Fiscal Policy;

JEL Classification: E6; H2; H5;

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Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2020-10-11

Number: WP 2023-11

Note: Updated March 14, 2023