The Effects of an Employment Promotion Policy for Disabled Workers: Evidence from South Korea

Many countries aim to promote the employment of disabled workers by using employment policies. In this paper, we investigate the effectiveness of an employment promotion policy in South Korea called the Mandatory Employment of Persons with Disability. Based on a rule in the policy for a penalty, we utilize regression discontinuity (RD) designs to estimate the causal effects of the policy on the employment of the disabled workers. We find that (i) the policy induces an increase of employment of disabled workers by 0.392, which is 4.63% of the average number of disabled employees in the sample, and that (ii) it increases the probability that firms fulfill the minimum proportion of disabled workers set by the government by 9.22%. To address the issue about manipulation of the running variable in our RD design, we present estimation results under partial identification. These results support that our point estimates of the RD causal effect can be interpreted as causal. However, the policy has no statistically significant effect on the wages of disabled workers. The results in the paper are expected to be useful for designing new policies on the employment of workers with disabilities.