Unemployment and the growth in the number of recipients of disability benefits in Norway

Abstract

The paper contains an analysis of factors behind the increases in the number of disability recipients in Norway. Entry rate functions for disability benefit are estimated using grouped time series data for entry rates by sex and age. It is found that an equation containing the level of unemployment, replacement ratios (after tax) and for women, labour participation rates, have a number of desirable properties. The estimated equations are then integrated in a model of entry into and exit from disability, and this model is used to decompose the inciease in the number of disability recipients in the 1980s. The increase in unemployment above 1980 levels explains about one half of the actual increase in recipients, whereas increased female labour participation and replacement ratios for men and women together explain the other half.