In this paper, we exploit the strong incidence of the Great Recession in Spain to
estimate the effect of economic conditions on participation in Disability Insurance (DI).
Using individual panel data, we show that increases in the local unemployment rate are
associated with a reduction in the individual probability to enter the DI program during
the Great Recession in Spain. Using aggregate data on applications, we show that this
procyclical behavior of DI awards comes from an increase in the ...
In this paper, we exploit the strong incidence of the Great Recession in Spain to
estimate the effect of economic conditions on participation in Disability Insurance (DI).
Using individual panel data, we show that increases in the local unemployment rate are
associated with a reduction in the individual probability to enter the DI program during
the Great Recession in Spain. Using aggregate data on applications, we show that this
procyclical behavior of DI awards comes from an increase in the proportion of applications
that are denied. Thus, contrary to the previous literature that has extensively reported
a countercyclical behavior of DI participation, our results provide new evidence that, in
periods of extremely recessionary conditions, DI participation may turn procyclical.
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