Estimating the impact of disability onset on employment

This paper examines the impact of disability onset on the probability of employment using an underexplored longitudinal dataset for Britain. It contrasts estimates based on a control group drawn from those not experiencing disability onset - a common approach in the literature - with estimates based on a control group drawn from those who do experience disability onset, but one year after the treatment group. Compared to the nondisabled control group, the control group of later-onsetters is likely to be more similar to the treatment group in terms of unobservables, with the resulting estimates therefore more plausibly interpreted as causal. Using this control group we estimate that the probability of employment falls by 11 percentage points in the year of disability onset. The equivalent estimate using the control group drawn from those not experiencing onset is about fifty percent larger. The employment effects of disability onset are also shown to be larger for those with lower qualification levels, consistent with weaker attachment to the labour market.