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Work-limiting disabilities and earnings volatility

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  • Jolly, Nicholas A.
  • Wagner, Kathryn L.

Abstract

This paper examines how the onset of a work-limiting disability influences male earnings volatility as measured by the variance of transitory earnings. Using data from the 1970 to 2013 survey waves of the Panel Study of Income Dynamics and a semi-parametric error components model, we decompose annual earnings into its permanent and transitory components. Results show that the variance of transitory earnings of disabled and non-disabled men is similar before onset of a work-limiting health condition. Upon onset, earnings volatility increases significantly, and does not return to pre-onset levels until at least five years after the last reported disability. Additional results show that earnings volatility has increased since 1970 for both disabled and non-disabled men. However, the trend in volatility is steeper for those who suffer from a disability. Despite this steeper trend, disability's contribution to the total variance of earnings has remained constant over time at roughly 15%.

Suggested Citation

  • Jolly, Nicholas A. & Wagner, Kathryn L., 2023. "Work-limiting disabilities and earnings volatility," Labour Economics, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:labeco:v:81:y:2023:i:c:s0927537123000088
    DOI: 10.1016/j.labeco.2023.102333
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    More about this item

    Keywords

    Disability; Earnings volatility; Error components;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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