Is self-reported disability status endogenous to labour force status?

Abstract

By estimating a simultaneous equation model on panel data, this study examines whether self-reported disability status is endogenous to labour force status. While for males the exogeneity of disability status cannot be rejected, it is rejected for females. However, for both males and females the results reject the justification hypothesis on self-reported disability status.

Acknowledgements

This article uses the data in the confidentialized unit record file from the Australian Department of Families, Community Services and Indigenous Affairs’ (FCSIA) Household, Income and Labour Dynamics in Australia (HILDA) Survey, which is managed by the Melbourne Institute of Applied Economic and Social Research. The findings and views reported in the article, however, are those of the author and should not be attributed to either FCSIA or the Melbourne Institute.

Notes

¹The endogeneity of disability may also arise from the reverse effect of employment on health or from unobserved heterogeneity that affects both labour force status and health (Cai and Kalb, 2006).

²People over the upper age bound are eligible for the age pension and therefore, are expected to behave differently. I exclude people under 25 years because many of them had not completed studies. In addition, people who were still undertaking full-time studies were also excluded.

Table 1 Labour force status by disability status of working-age Australian men and women