Essays on disability and employment

Despite the growing prevalence of disability among prime age men and strong correlations between disability and negative employment outcomes, few economic analyses address the avenues through which disability may influence these observed outcomes. Particularly, the impact of disability on employment decisions of disabled workers who remain employed is unknown. In this research, I focus on employment transitions and occupational choice, and the role these employment outcomes play as contributors to disability status and the observed difference in wages of working age males. Based on a dynamic framework of employment transitions and disability over time, the empirical model estimates equations for employer and occupational changes, occupational choice, disability status, and wages of men. The analyses are conducted using longitudinal data on individuals from the Survey of Income and Program Participation and data on occupations from the Dictionary of Occupational Titles. A nonlinear random effects joint estimation technique accounts for both permanent and time-varying unobserved heterogeneity that may influence employment transitions, wages, and disability. The results suggest that moderately disabled workers are 23 percent more likely to change occupations and/or employers compared to non-disabled men and that these transitions contribute negatively to wages through reductions in tenure. Furthermore, disabled individuals are found to select into occupations with low requirements of most job characteristics, most significantly reasoning and math. While the majority of these job characteristics have only a small impact on disability status, they have a large and significant effect on wages. The importance of controlling for occupational choice is also revealed, as the marginal effect of characteristics on wages differs across analyses that do and do not control for endogenous occupation selection