Socio-Economic Impact of Disability in Latin America: Chile and Uruguay

Dante Contreras G. Paz Garc es

Jaime Ruiz-Tagle V. Irene Az ocar

July 21, 2006

Departamento de Econom a Universidad de Chile

Department of Economics, Universidad de Chile. e-mail: dcontrer@econ.uchile.cl. Department of Economics, Universidad de Chile. e-mail: JRT@cantab.net. Ministry of Planning, Gobierno de Chile, e-mail: pgarces@mideplan.cl. FOCUS. e-mail: iazocar@focus.cl.

Contents
List of Figures List of Tables 1 Introduction 2 Data description 2.1 2.2 2.3 Chile: CASEN 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uruguay: ECH 2003-2004 . . . . . . . . . . . . . . . . . . . . . . . . Descriptive Statistic . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 5 7 7 9 11 17 17 23 25 25 26 26 27 30 31 33 34 37 39 42 49 53 57 58 58

3 Disability and Society 3.1 3.2 3.3 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disability in Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.1 3.3.2 3.3.3 3.3.4 3.3.5 3.4 3.4.1 Education and Disability in Chile . . . . . . . . . . . . . . . . Labour Integration and Disability in Chile . . . . . . . . . . . Gender and Disability in Chile . . . . . . . . . . . . . . . . . . Assistance Pension for Disability . . . . . . . . . . . . . . . . First National Study on Disability in Chile . . . . . . . . . . . Uruguays First National Survey on People with Disability . .

Relational Models between Disability and Socio-economic Disadvantages 22

Disability in Uruguay . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 Labour Market and Disability 4.1 4.2 4.3 4.4 4.5 Eects of Disability on Education . . . . . . . . . . . . . . . . . . . . Wages, participation, return to education and disability . . . . . . . . 4.2.1 Econometric Models . . . . . . . . . . . . . . . . . . . . . . . Earnings and returns . . . . . . . . . . . . . . . . . . . . . . . . . . . Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 Poverty and Income Distribution 5.1 5.2 Poverty Incidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Probability of being Poor . . . . . . . . . . . . . . . . . . . . . . . . . 2

5.3

Income Distribution and Disability . . . . . . . . . . . . . . . . . . .

61 64 65 67 71 73 76 77 78 78 81

6 Simulation of Social Policies 6.1 6.2 6.3 Policy Simulations Exercise . . . . . . . . . . . . . . . . . . . . . . . Policy Simulations in Chile . . . . . . . . . . . . . . . . . . . . . . . . Policy Simulations in Uruguay . . . . . . . . . . . . . . . . . . . . . .

7 Conclusions 8 Bibliography 8.1 Internet Links . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appendices A Disability and Income Distribution B Policy Simulation

List of Figures
1 2 3 4 Representation of the model of disability of the ICF . . . . . . . . . . Disability and Income Distribution: Chile (all disability) . . . . . . . Disability and Income Distribution: Uruguay (severe disability) . . . Disability and Income Distribution: Uruguay (all disability) . . . . . 20 78 79 80

List of Tables
1 2 3 4 5 6 7 8 Incidence of Disability by Age: Chile and Uruguay . . . . . . . . . . . Incidence of Disability by Gender: Chile and Uruguay . . . . . . . . . Incidence of Disability by Ethnic origin: Chile . . . . . . . . . . . . . Incidence of Disability by Geographic Zone: Chile and Uruguay . . . Education of workers: Chile and Uruguay . . . . . . . . . . . . . . . . Education Lag: Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . Education Lag: Uruguay . . . . . . . . . . . . . . . . . . . . . . . . . Chile: Labour Market Participation . . . . . . . . . . . . . . . . . . . 12 14 15 16 35 36 37 39

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Uruguay: Labour Market Participation . . . . . . . . . . . . . . . . . Chile: OLS Regressions of Hourly Wage . . . . . . . . . . . . . . . . Returns to Education: Chile . . . . . . . . . . . . . . . . . . . . . . . Uruguay: OLS Regressions of Hourly Wage . . . . . . . . . . . . . . . Returns to Education: Uruguay . . . . . . . . . . . . . . . . . . . . . Chile: Probit Regressions of Participation in Labour Force . . . . . . Uruguay: Probit Regressions of Participation in Labour Force . . . . Unemployment Rates: Chile and Uruguay . . . . . . . . . . . . . . . Unemployment Probit Regressions: Chile . . . . . . . . . . . . . . . . Unemployment Probit Regressions: Uruguay . . . . . . . . . . . . . . Poverty Rates: Chile and Uruguay . . . . . . . . . . . . . . . . . . . Probit Regressions of Probability of Being Poor: Chile . . . . . . . . Probit Regressions of Probability of Being Poor: Uruguay . . . . . . . Deciles of Income Distribution and Disability: Chile and Uruguay . . Simulation of Social Policies in Chile: Eects on Poverty Rates . . . . Simulation of Social Policies in Chile: Cost of Policies . . . . . . . . . Simulation of Social Policies in Chile: Eects on Income Distribution Simulation of Social Policies in Uruguay: Eects on Poverty Rates . . Simulation of Social Policies in Uruguay: Cost of Policies . . . . . . . Simulation of Monthly Resources Allocated to PASIS Subsidy: Chile

40 43 45 46 48 50 52 54 55 56 59 61 62 63 68 69 70 71 72 81

Simulation of Social Policies in Uruguay: Eects on Income Distribution 73

Introduction

The analysis of economic opportunities of people with disabilities and the social inclusive policies aimed to increase social welfare is a topic that has received a great deal of attention in recent years. The world concern for making a more inclusive society indicates that society is responsible for an adequate insertion of the disabled who are excluded of normal activities of life. Literature has considered three possible explanations for the relationship between disability and socio-economic outcomes. First, disability may diminish peoples capacity for earning money. In addition, disability of a member of the family could aect the job opportunities of other family members due to caring activities. Second, a similar pattern could explain a lower human capital accumulation. Finally, socioeconomic disadvantages could be correlated with health condition and a poor access to quality health treatment that could prevent or early detect disability problems. Also, we would expect a dierent attitude towards risky situations and a higher probability of participating in riskier occupations. This eect could be potentially more important in Less Developed Countries (LDCs) Although policies to include people with disabilities have been introduced in many developed countries, little evidence has been provided based on measured eects in LDCs. By using information on two national representative household surveys for Chile and Uruguay in 2003, the paper provides pioneering evidence on the impact of the economic opportunities of individuals with disabilities in these countries. These two Latin American countries provide some ground to understand the opportunities in the access to education, participation, earnings and unemployment that those individuals with disabilities (or living in a household with members with disabilities) have. The opportunities in the labor market that individuals face may have important eects on poverty and income distribution. Given that poverty is measured by comparing per capita household income with a poverty line, by using the previous estimates on labor market outcomes we examine through microsimulations the eect of dierent polices oriented to individuals with disabilities and their eect on poverty and inequality. 5

The evidence indicates that individuals with disabilities have a signicant lower access to formal education, which limits their human capital accumulation and expected performance in the labor market. In addition, conditional on participation, the results show that people with disabilities obtain lower return to schooling and exhibit lower participation rates. One interesting result is that such eects are not signicant when there is a family member with some disability. However, access to formal education is also limited when there is a family member with disability. On the other hand, due to the small impact on labor market outcomes (participation and earnings), policies aimed to increase economic opportunities to individuals with disability in the labor market present a positive, signicant and small impact on welfare. This may be explained by the fact that individuals with disabilities experience diculties to accumulate formal human capital, which explain that those participating in the market are not able to generate enough earnings to alleviate poverty or increase welfare. Finally, we simulate the eects of subsidy to individuals with disabilities in Uruguay equivalent to 90% of the poverty line (as PASIS is in Chile). If such subsidy were implemented we would observe a poverty alleviation of 17 percentage points. However, such a subsidy would represent 10% of the Uruguayan public expenditure. In Chile this subsidy may be facing signicant targeting problems. According to CASEN, only 18% of individuals with disabilities actually receive PASIS. When a correction of this misallocation is simulated, we observe that poverty rates are reduced from 23% to 16%, implying a direct cost that would represent less than 3% of public social expenditures. The rest of this paper is organized into six sections. Section 2 provides a brief description the data used in this paper. Section 3 discusses disability and society, explaining the complexity of the disability problem. Section 4 analyses labour market performance of individuals with disability. Section 5 reviews poverty incidence among individuals with disability and their respective households, and income distribution of those households compared to the overall population. Section 6 presents

some simple policy simulation exercises. Finally, section 7 concludes.

Data description

Information on disability is scarce in Latin America. Only recently some eorts to collect information on people with some sort of disadvantage have been made. In the case of Chile, in 2000 and 2003 some questions about disability were added to the main socio economic survey. Lately, in 2004, a deep study on disability was carried by FONADIS, but it lacked of socio economic data. In Uruguay, only in 2003 a module of disability was added to the most relevant national socio economic survey. In this section we review these data sources1 and explain briey how we will use the information on disability in later sections. For comparison purposes this study will use the data sets on disability presented in the National Survey of Socio economic Characterization (CASEN) 2003, for Chile, and the Continuous Household Survey (ECH) 2003-2004, for Uruguay. Both data sets were collected in similar periods and both instruments are reliable sources of information in each country. These surveys are described in the next sections 2.1 and 2.2, respectively.

2.1

Chile: CASEN 2003

The National Survey of Socio economic Characterization (Encuesta Nacional de Caracterizaci on Socioecon omica - CASEN-) was rst applied in Chile on 1985 and it has been applied periodically since then. The last version of CASEN was reported on
1

There are other data sources regarding disability in both countries, such as, the Health an Living

Conditions Survey (2000), in Chile; and the National Disability Survey (2004), the ENEVISA Survey (2004) and the Continuous Household Survey (1991-1993), in Uruguay. Nonetheless, only CASEN 2003 and ECH 2003-2004 are described thoroughly in this paper given that these data sets are used in the analysis presented here.

2003. The main objectives of Casen 2 are, in the rst place, to know the situation of households and population, specially of those living in poverty and of those groups dened as priority of social policy, with respect to their demographic, educational, health, housing, occupational and income situation. In the second place, evaluating coverage and distribution of governmental expenditure and its impact on households income and its distribution. The 2003 CASEN was applied to a sample of 68,150 households and 272,000 individuals. This sample was sort from the data provided in the National Census 2002 and it was representative both regional and community level. One of the new issues covered in this survey is the question oriented to identify people with disability within households. It is important to mention that, in this survey, the disability condition is self-declared, so this data might dier from other sources, such as the data from the Disability and Preventive Medicine Commission (COMPIN), where every deciency has to be veried by a medical opinion. Evidently, it is impossible to compare the gures reported for disability using such dierent methods. The question used in CASEN is: Is there any member of the household that presents one or more of these deciencies...? (Mention max. three per individual) 1. Hearing Deciency 2. Talking Deciency 3. Seeing Deciency 4. Mental Deciency 5. Physical Deciency 6. Psychiatric Deciency
2

Volumen 1: Pobreza, Distribuci on del Ingreso e Impacto Distributivo del Gasto Social. Serie

CASEN 2003. Ministerio de Planicaci on y Cooperaci on, Gobierno de Chile. Agosto, 2004

7. None

In this survey, Person with Deciency is every person who has lost or has a permanent damage in any organ related with mental function (understanding, learning, etc.), sensory function (seeing, hearing, etc.) or anatomic function (walking, manipulating objects, etc.). The Deciency might be total or partial and congenital or acquired. The presence of deciency is the main handicap that denes a disability condition in a person. For the purpose of the analysis in this paper, the relevant denition of the disability concept,that relates it with the deciency concept, is the one used by the National Fund for Disability (FONADIS), in the First National Study on Disability in Chile:3 Disability is a generic term that includes deciencies of body functions and/or structures, activity limitation and restrictions in participation, indicating the negative aspects of the interaction between an individual (with a health condition), and his context (environmental and individual factors). This data set was selected because it is the most complete data containing, not only information about disability, but also socio economic information about population with disability. In addition, the most recent one and its the most compatible with the one obtained from Uruguay.

2.2

Uruguay: ECH 2003-2004

The Continuous Household Survey (Encuesta Cont nua de Hogares - ECH) was established in 1968 and is run almost permanently since then by the National Statitic Oce (Instituto Nacional de Estad sticas). This survey is applied monthly and its main objective is to collect information on socio-demographic and economic characteristics of the population, particularly education and income, in places with 5,000
3

First National Study on Disability . National Fund for Disability (FONADIS). Chile, 2004. For

further information see section 3.3.5.

and more inhabitants of the whole country. The ECH allows to add module of additional questions for particular groups. In August 2003 and for one year a module of disability was included under the projetc of the First National Survey on Disability. About 18,300 households and 56,000 individuals were included in the sample in a an homogeneous manner during the period. As a reference framework the International Classication of Functioning, Disability and Health (ICF) of the World Health Organization (WHO) was implemented. We review the denitions of disability in more depth in section 3. The questions regarding disability used in this survey are of the following form: Is there any member of the household that is: blind, deaf, does not speak, does not walk, does not move arms or hands, has mental limitations that makes relationship dicult, has mental limitations that makes learning dicult, other permanent limitation? 1. Is blind, deaf, etc. 2. With limitations 3. Without this disability

Based on the questionnaire, we consider two denitions of disability: Severe disability and Mild disability. Severe disability corresponds to individuals who are blind, deaf, cannot speak, cannot walk, has no arms or hands mobility, has mental limitation for reasoning, has mental limitations for learning, or has other permanent limitation. Mild disability includes: sight limitations, hearing limitations, speaking limitations, walking limitations and mobility limitations of arms or hands. Also, Mild disability includes technical help requirements (walking stick, wheel chair, etc.), and required help of another person: to take car of oneself, to relate with others, to move around within the household, to move around outdoors, or to be integrated into learning. We will call all disability both severe and mild disability.

10

2.3

Descriptive Statistic

Since the data in CASEN 2003 does not make a distinction between severe or total disability, it is assumed that this survey reports all kinds of disabilities together. Therefore, the comparable gures correspond to the Chilean data reported in CASEN 2003 and the all disability denition used for Uruguay. In this section, descriptive data is presented for both countries, using the all disability denition for Chile and the all disability and severe disability denitions for Uruguay. Table 1 shows the incidence of disability by age for Chile and Uruguay. In Chile, using the denition of all disability based on CASEN 2003, we observe that 3.6% of the population have a disability. However, the presence of disability is above average only for individuals 65 or more (14.1%). This indicates that disability is a particularly relevant problem among elderly people. In section 3.3.5 we report the results of a survey specically designed to assess disability in Chile, which main shortage is the lack of comprehensive socio-economic and labor information. In terms of socio-economic impact of disability, it is worth to remark that disability is below average for working age individuals: 2.3% for individuals aged between 14 and 18, 1.9% for individuals aged between 19 and 24, and 3.4% for individuals aged between 25 and 64.

Figures for Uruguay are separated for severe and all disability denitions. We observe a 2.5% of severe disability accross the whole population. Only individuals aged 65 and more have more than average presence of disability, but the gure of 4.7% is not extremely large conpared to the rest of the population. This indicates that, although severe disability is related to age, the incidence is not particularly higher for elderly people. According to the denition of all disability, Uruguay presents 7.6% of individuals 11

Table 1: Incidence of Disability by Age: Chile and Uruguay

Disability by Age (%) Disability of Individual Without With

CHILE (all disability) 0 to 14 15 to 18 19 to 24 25 to 64 65 and more Total URUGUAY (severe disability) 0 to 14 15 to 18 19 to 24 25 to 64 65 and more Total URUGUAY (all disability) 0 to 14 15 to 18 19 to 24 25 to 64 65 and more Total 96.9 96.8 97.1 94.4 75.5 92.4 3.1 3.2 2.9 5.6 24.5 7.6 97.8 97.5 98.1 97.9 95.3 97.5 2.2 2.5 1.9 2.1 4.7 2.5 98.2 97.7 98.1 96.6 85.9 96.4 1.8 2.3 1.9 3.4 14.1 3.6

12

with at least a all disability. Among elderly people (individuals aged 65 and more), a 24.5% incidence of disability is observed. All other age groups have below average incidence of disability. From this gures, it is possible to extract that all disability is much more a problem of ageing than severe disabilty, whose pattern we also nd for Chile. Table 2 presents statistics of disability separated by gender. The rst two columns consider the gender of the individuals with and without disability. Third and forth columns consider the gender of the household head for household with and without a member with disability. Gender of the household head is important because households headed by females tend to be more likely to have disadvantages that lead to poverty. In the Chilean case, it is observed that females tend to have marginally less incidence of disability at the individual level (3.4% for females, 3.8% for males), but it is more likely they head a household with a member with disability: 8.0% of the households with a member with disability are headed by household head, compared to 6.7% headed by males. Notice that 7.0% of the households have member with disability. The picture is somehow dierent for Uruguay. Fist, the percentage of females individuals with a severe disability is lower than males (2.3% for females compared to 2.8% for males). However, households with a member with severe disability are headed by females and males almost in the same way (4.8% heade by males and 4.9% headed by females). Observe also that 4.8% of the households have a member with severe disability. When considering all disability, it is observed that the percentage of females with all disability is larger than of males (8.2% females compared to 7.0%). Nevertheless, households with a member with all disability are mostly headed by males (10.0% by males and 7.8% by females). Household with a member with a all diasbility account for 9.3% of total households.

Disability could be associated to some sorts of discrimination, associated for example to ethnic origin. Information on ethnic origin is not available for Uruguay, but Chilean data does. Table 3 shows the incidence of disability by ethnic origin, group-

13

Table 2: Incidence of Disability by Gender: Chile and Uruguay

Disability by Gender (%) Disability of Individual Without With Disability of Household Member Without With

CHILE (all disability) Males Females Total URUGUAY (severe disability) Males Females Total URUGUAY (all disability) Males Females Total 93.0 91.8 92.4 7.0 8.2 7.6 90.0 92.2 90.7 10.0 7.8 9.3 97.2 97.7 97.5 2.8 2.3 2.5 95.3 95.1 95.2 4.8 4.9 4.8 96.2 96.6 96.4 3.8 3.4 3.6 93.3 92.0 93.0 6.7 8.0 7.0

Note: Disability of Household Member counts percentage of households and gender is of the household head.

14

ing all ethnic minorities in one (ethnic minorities in Chile account for 5.4% of the population). There is no evidence of larger impact of disability on ethnic minorities since percentage of individuals with disability is 3.5%, similar to the 3.6% at national level. Table 3: Incidence of Disability by Ethnic origin: Chile
Disability by Ethnic Origin (%) Disability of Individual Without With

CHILE (all disability) From Ethnic minority Not from Ethnic minority Total 96.4 96.5 96.4 3.5 3.6 3.6

Finally Table 4 presents the incidence of disability by geographic zone for Chile and Uruguay. There is a larger percentage of individuals with disability in rural zones than in urban zones in Chile (4.2% in rural areas compared to 3.5% in urban areas). Moreover, households with a member with disability are 8.1% in rural areas and 6.9% in urban areas. This indicates that disability is more present in rural than in urban areas in Chile.

In Uruguay the comparison is Montevideo and the rest of the country. In the rest of the country there is slightly mode individuals with severe disability, 2.7% compared to 2.4% in Montevideo, and the the percentage of households with a member with a severe disability is 5.3% in the rest of the country and 4.3% in Montevideo. When comparing the gures for all disability it is observed that percentages are very similar for rest of the country and Montevideo. There is a 7.5% of individuals with all disability in the rest of the country and 7.7% in Montevideo. Besides, there is a 9.7% of households with a member with all disability in the rest of the country and 9.0% in Montevideo. Hence, although there is slightly larger percentage of individuals with disability out of Montevideo, what is more clear is that there is larger percentage 15

Table 4: Incidence of Disability by Geographic Zone: Chile and Uruguay

Disability by Geographic Zone (%) Disability of Individual Without With Disability of Household Member Without With

CHILE (all disability) Rural Urban Total URUGUAY (severe disability) Montevideo Rest of the country Total URUGUAY (all disability) Montevideo Rest of the country Total 92.3 92.5 92.4 7.7 7.5 7.6 91.0 90.3 90.7 9.0 9.7 9.3 97.6 97.3 97.5 2.4 2.7 2.5 95.7 94.7 95.2 4.3 5.3 4.8 95.8 96.5 96.4 4.2 3.5 3.6 91.9 93.1 93.0 8.1 6.9 7.0

Note: Disability of Household Member counts percentage of households.

16

of households with a member with disability in the rest of the country compared to Montevideo.

Disability and Society

In this section we will mention the main theories regarding disability, the most important international agreements on this issue and some approaches to models on the relationship between disability and socio-economic disadvantages. Also, this section contains some data on disability in both countries analysed in this paper, i.e. Chile and Uruguay. The purpose of this section is to give an idea about the conceptual context in which this study takes place. Nevertheless, to extend the theories presented here goes beyond the scope of this study.

3.1

Disability

The world concern for making a more inclusive society, in which everybody has the chance to satisfy their needs and to develop themselves in every aspect of their lives, has as a consequence a list of international agreements which rule countries behaviour on these issues. Each of them refers to the need of protecting the socially excluded in one respect or another. In the last decades, the Disability concept has lost its illness connotation i.e. in which society gets involved only through medical intervention. Instead it has become a social problem that is meant to be treated by society as a whole.4 Therefore, society is responsible for an adequate insertion of the disabled who are excluded of normal
4

For further references on these concepts see the Report of the United Nations Consultative Ex-

pert Group Meeting on International Norms and Standards Relating to Disability, United Nations, December 1998.

17

activities of life. A number of papers have been written on this problem and a number of agreements and conventions have been signed in order to have some international standards regarding disabled people and their rights. 1948: Universal Declaration of Human Rights 1980: The World Health Organization develops the Community Based Rehabilitation (CBR). 1981: The UN declares this year the Disability International Year 1982: The UN subscribes the World Programme of Action Concerning Disabled Persons 1993: The UN subscribes the Standard Rules on the Equalization of Opportunities for Persons with Disabilities 1999: The OAS signs the Inter-American Convention on the Elimination of all forms of Discrimination against Persons with Disabilities 2004: The chiefs of state of Spain, Portugal and Latin-American Countries declare this year the Iberoamerican People with Disability Year There are other international organizations that have become part of the defence of this cause.

Pan American Health Organization (PAHO) Has taken a number of measures regarding the Disability issue. Its work has concentrate on human resources training, mainly, rehabilitation and disability prevention. This organization has also promote technical cooperation between countries. The Community Based Rehabilitation (CBR), has been implemented with the support of PAHO in many countries in the last decades International Labour Organization (ILO) Has developed programmes to promote the creation of dignifying jobs for men an women with disabilities in order to overcome obstacules that might interfere with their inclusion in the labour market. United Nations Childrens Fund (UNICEF) Watches over the fullment of the International Convention of Childrens Rights, developing strategies to 18

include children with disabilities into their programmes. Disability is one of the issues they take care in order to attain a global development of children. United Nations Educational, Scientic and Cultural Organization (UNESCO) Has taken care of Special Education, disigning policies and laws, training teachers an giving nancial support. They design the framework for the World Declaration on Education for All (1990). WORLD BANK (WB) It concentrates on the sustainable development of nations. In the context of inclusive development, the Advisory Service on Disability and Development, was created on 2000. This oce concentrates on people with disabilities and the exclusion conditions they have to face, especially in developing countries. Inter-American Development Bank (IADB) The work of the Bank regarding disability can be classied in two areas: (a) Urban Development, e.g., access to public transportation. (b) Social Development, e.g., poverty and exclusion of people with disability; improvement of statistical analysis system and data collection; and market labour insertion of people with disability. In Chile and Uruguay the IADB has worked in labour insertion programmes and statistical and legal framework studies, among others.

All the eorts made by the nations regarding the disability problem- which have been made explicit in these agreements and conventions- focus their attention on the inclusion of all the members of society by pursuing a sustainable economical, political, social and cultural development of all people in the world. This phenomenon is summed up in the concept Inclusive Development. Nowadays, the most widespread set of denitions around this subject is the one included in the International Classication of Functioning, Disability and Health (ICF) of the World Health Organization (WHO).

19

Figure 1 presents a diagram5 is one representation of the model of disability that is the basis for ICF:

Figure 1: Representation of the model of disability of the ICF

In this denition disability an functioning are viewed as outcomes of interactions between health conditions and contextual factors 6 . Among contextual factors we nd environmental factors, such as social attitudes and legal structures; and personal factors, such as age and gender. We can identify three levels of human functioning, so that disability involves dysfunctioning at one or more of these levels. The formal denitions of the components of IFC are the following 7 :
5

Towards a Common Language for Functioning, Disability and Health - ICF. WHO, Geneva,

2002. 6 Id. 1 7 Id. 1

20

 Body Functions are physiological functions of body systems (including psychological functions). Body Structures are anatomical parts of the body such as organs, limbs and their components. Impairments are problems in body function or structure such as a signicant deviation or loss. Activity is the execution of a task or action by an individual. Participation is involvement in a life situation. Activity Limitations are diculties an individual may have in executing activities. Participation Restrictions are problems an individual may experience in involvement in life situations. Environmental Factors make up the physical, social and attitudinal environment in which people live and conduct their lives.

Disability theories dene the concept as a social product and not as an individual problem. Under this denition Disability is determined by the relationship between a persons mental or physical deciency and his or her social, political, economical and cultural enviroment. Another way to analyze the same problem is by using the human functioning concept. The functioning levels vary enormously within society, therefore, this should be considered by the public policy designers. When someone with dierent level of functioning does not have access to medical attention or treatment, education or a job, etc., then a disability condition is generated.

21

All of these theories are coherent with the Inclusive Development concept. They also agree in the main issues that should be solved in order to reach this kind of development in the context of the Disability problem: To incorporate Inclusive Development in the public policy designing. Promote political and institutional empowerment of disabled people organizations. Involve other institutions in each country and inform them about the exclusion situation in which disabled people live in order to avoid prejudice towards disability. To sensitize the private sector to promote the incorporation of disabled people in the labour market. In this way they can make themselves productive. Promote international cooperation to support disability organizations. Promote alliances between the public sector, the private sector and civil society, in order to have a correct implementation of programmes focused on disabled people.

3.2

Relational Models between Disability and Socio-economic Disadvantages

8

Literature have considered three possible explanations for the relationship between disability prevalence -in any of its forms- and belonging to a disadvantaged socioeconomic group: In the rst place, we can observe a causal relationship between disability and socioeconomic disadvantages. In this case disability would diminish peoples capacity for earning money. In addition to this, disability of a member of the family would aect the possibility of having a job of other members of the family because most of
8

Socio-economic Disadvantage and Prevalence of Disability. Social Policy Research Centre, Uni-

versity of South Wales, Australia. 2000

22

the time they have to take care of the disabled relative. In the second place, we can observe an inverse causal relationship. Socioeconomic disadvantages would inuence in a bad health condition and a poor access to quality health treatment that could prevent or early detect disability problems. Also, we would expect a dierent attitude towards risky situations and a higher probability of participating in riskier occupations. At last, we can observe the presence of factors that mediate the relationship of these two phenomena, which strengthen their coexistence. For example, sons could inherit bad health from their parents. This fact certainly has an impact on the possibility of parents of having a job. Other variables involved would make more dicult to observe the real relationship between Disability and Socio-economic Disadvantages.

3.3

Disability in Chile

Since the 1980s our society has experienced an evolution towards the Disability concept. Also, the concern for disabled people has changed, together with the idea of the proper inclusion of these people in society. In a rst period, the responsibility for demanding more integration oportunities and social participation for the disabled was entirely on the hands of civil society organizations such as social services organizations, parents organizations, and groups of professionals from diverse disciplines. The assistance provided by these organizations was crucial for the disabled people because it was the only help they could get. Nevertheless, the solutions given by these organizations did not look upon the fact that disabled people have an important role in understanding and overcoming their problems. Although this was a paternalistic approach to the problem, these experiences set the basis for the promulgation of the Law 19.284 Social Integration of Disabled People in the 1990s. A number of institutions were involved in order to design this law, such 23

as, the Public Health Department, the Medical Association and the National Commission for Disability (CONADIS), which was the predecessor of the National Fund for Disability (FONADIS). The contents of this law were inspired by other countries models, especially those from the United States and Spain. These models already incorporated the community participation in the disabled social inclusion. They also considered the active participation of disabled people on pursuing a better quality of life and autonomy. In the Law 19.284 Disabled Person is every person who presents one or more physical, psychic or sensorial permanent deciencies (congenital or acquired) and consequently has his or her life constrained in at least one third of his/her educational capabilities, labour or social integration, with independence of the circumstances which cause the deciencies. In addition, the Law denes these three concepts: Educational Disability: The person, because of his/her particular characteristics, has special needs regarding learning tasks. This demands curricular adaptations, in order to guarantee real educational possibilities. Labour Disability: Incapability of obtaining a job in accordance with the persons sex, age and training, which enables him/her to earn an equivalent salary of a non-disabled person in the same situation. Social Integration Disability: The person -due to his/her psychic (mental), physical or sensorial deciencies- is incapable to insert his/herself in activities of human societies, family or societys organized groups. This diminishes the possibilities for a material and spiritual realization in comparison with a non disabled person (same age, sex, training, socio-economic condition, similar familiar situation and same geographical location).

This law utilized the same conceptual framework for disability as the National Survey of Socio Economic Characterization (CASEN). The deciencies that legally dene a disability condition for a person, are specically included in the question of the 24

survey regarding disability. The disability denition in both the law and the survey, is particularly relevant for the rest of this study in the sense that it denes the type of disadvantages that an individual with disability can face and how it can aect his well-being. 3.3.1 Education and Disability in Chile

The universal right to education, with independence of socioeconomic situation, ethnic, sex and disability condition, has been ratied by a number of international agreements and conventions in the last decades. The Ministry of Education in Chile, with the collaboration of a group of related institutions (being the most important the National Fund for Disability (FONADIS)), has adopted a set of measures with the purpose of taking care of disabled students with special educational needs (Necesidad Educativa Especial - NEE). In this context, the standpoint of institutions involved in these issues is to match opportunities by incorporating disabled population to the Normal Education System. To succeed in this task programmes have been implemented on subjects going from sensitizing people on this problem to nancing projects and scholarships. However, there is still a need for Special Education for the cases that do not t in Normal Education, in order to respect the right of every citizen to be given instruction.

3.3.2

Labour Integration and Disability in Chile

In the Law 19.284 Social Integration of Disabled People, the Government of Chile has compromised to promote job training for disabled people by allowing their participation in governments job training programmes, making sure to adapt all the materials used by the disabled people. It is also important that the job training corresponds to occupations required by the labour market. 25

In addition to this, the government compromises to support the insertion of disabled people in the labour market, in order to guarantee their independence, personal development, their right to raise a family and to have a dignifying life. It is important to mention that both job training and professional orientation should match the previous diagnosis made for each beneciary.

3.3.3

Gender and Disability in Chile

Although Chile hasnt got a special normative regarding women and disability, our country has been part of the world discussion of this issue and has signed the international agreements on womens rights (Beijing, 2000 9 ). The international conventions have resulted in the commitment of governments to guarantee certain rights to women by promoting quality education, physical and mental health, paying special attention on overcoming inequities regarding social situation, sex, ethnic origin and disability condition. They also commit to strengthen social protection systems, specially protecting from poverty people that cant work because of illness, disability, old age, maternity, etc.

3.3.4

Assistance Pension for Disability

10

The Chilean law

contemplates an assistance pension (PASIS) for people with dis-

ability that are incapable of earning a living by working and, for some reason, are not aliated to a prevision system. For this purposes, disabled is every person, 18 years or older, who is permanently unable to work or his/her capability of working has
9

Women 2000: gender equality, development and peace for the twenty-rst century UN general

Assembley, Beijing, 2000. 10 DFL No 869, 1975. This assistance pension is given also to old people who are poor and are not receiving pensions from another social security system.

26

been considerably diminished, in such a way that cannot provide his/herself the basic goods for subsistence, and does not receive a pension from another social security system. The assistance pension consists on an amount of money
11

given every month to

disabled people with the characteristics described above. This pension cannot be received jointly with any other assistance pension. Nevertheless, it is compatible with other incomes if they are inferior to half of the amount of the pension. In order to receive this pension is imperative to certicate the disability condition in the Disability and Preventive Medicine Commissions (Comisiones de Medicina Preventiva e Invalidez - COMPIN-). These commissions are part of the public health services and consist of a multidisciplinary professional team (doctors, social workers, psychologists, etc.) that is in charge of verifying, certifying, evaluating, and declaring the disability condition of a person. Unfortunately, there isnt a standard criterion to dene disability, so it depends on the criterion of each commission to what extent a deciency is considered so. This becomes a problem when trying to compare this data to the one obtain in the surveys, such as CASEN, where disability is self declared.

3.3.5

First National Study on Disability in Chile12

The goal of the First National Study of Disability in Chile (hereafter, FONADIS study) was to Know the Prevalence of disability in its dierent types and degrees; and the extent in which this condition aects individuals in various aspects of their lives
13

The conceptual denition of the study, as well as the instrument to compile infor11

This amount of money is equivalent to $37.412 Chilean pesos (approximately US$60). This is

the same as the old-age pension and it is slightly larger than a quarter of the minimum wage. 12 First Nacional Study on Disability. Nacional Fund for Disability (FONADIS). Chile, 2004. 13 Id. 6

27

mation is based in the International Classication of Functioning, Disability and Health (ICF) which was promulgated by the World Health Organization and the Pan American Health Organization (PAHO-WHO, 2001). Prior to this study, the prevalence of disability in Chile was calculated directly in surveys with just one question (CENSO and CASEN). The number of positive answers that individuals gave with regard to the presence of certain decits in the inquiry was assigned as a national percentage. In the Quality of Life Survey of year 2000, the prevalence of disability corresponded to the total number of individuals that referred at least one problem in any of the questions in the disability section. In this study a Disability Index was created in order to capture all aspects of the denition of Disability used here for the rst time: Disability is a generic term that includes deciencies of body functions and/or structures, activity limitation and restrictions in participation, indicating the negative aspects of the interaction between an individual (with to health condition), and his context (environmental and individual factors)
14

The Disability Index was built based on a survey of 13.769 households, with 95% level of condence. The survey consisted of a probabilistic three-stage sample design, which enabled representation of the Chilean population. It was stratied in the urban and rural areas of the country, i.e. represents all the regions of the country. Here we present some of the most important results of the study15 : National prevalence of Disability : 12,9% of the Chileans live with a disability; this means that 2.068.072 individuals - 13 out of 100 or 1 out of 8 - have this condition. Degrees of Disability 7,2% have a mild degree of disability; 3,2% moderate and 2,5% severe.
14 15

Id. 6 This study is an excellent eort on expanding the concept of disability to a functioning concept

for the Chilean case, and it is recommended reading for a deeper understanding of the disability problem. See www.fonadis.cl

28

 Disability and deciency 8,2% of the national population with a disability has an associated deciency. Disability per age range Disability is 4 times more frequent in adults than in children and 14 times more frequent in older adults that in children. One out of 2 individuals with disability is between 30 and 64 years old. Disability according to age and gender Until age 15, disability is more predominant in males than in females. In the 15 to 40 age group they level o and from 40 on it inverts; there are more women with disability than men. Socioeconomic status / impact of disability on the family 39,5% of the people with disability have poor socioeconomic conditions. Of the individuals with disability, 81% declare that disability has somehow aected the family economic situation; 50% state that it has aected it very much, and almost 6% mention that it has had an extreme impact. Disability and work 29,2% of the people with disability over 15 are engaged in gainful employment. Men comprise more than 60% of the population with disability over 15 that is gainfully employed, while only 38,7% of women with disability in productive age are gainfully employed. Disability and education 8,5% of the individuals with disability are currently studying (175.282 individuals). This means a dierence of 27,5% of the countrys total population that currently studies. 10% do not have even one year of education approved; 42% have not been able to nish elementary school; only 13% have nished high school and a scarce 5,7% have had access to college or to an institute of professional technical education. Less than 1% has nished a career in a center of technical education. There is a high percentage of people with disability (94%) between 6 and 14 years that are currently studying. However, the percentual decreases signicantly when entering high school or college. Only 37% of the people with disability between 15 and 29 years of age are currently studying. Access to health, social and rehabilitation services Three out of four individuals with disability have had access to some health, social and rehabilitation services

29

in the last year. 6,5% of the individuals with disability have received rehabilitation services in the last year.

The main drawback of the FONADIS study is the lack of important socio-economics information. In particular they did not collected information on any form of income (wages, pensions, subsidies, etcetera). Also, the FONADIS study did not ask about any labor information. So, in their study it is not possible to establish employment and unemployment status, labor market discrimination and poverty, for example. On the contrary, the main focus of this study is the socio-economic impact of disability.

3.4

Disability in Uruguay

In the case of Uruguay, the government has implemented the Disability National Programme (Programa Nacional de Discapacidad -PRONADIS-). This is a Health Programme which is part of the Priority Programmes Department of the Republic of Uruguay. Its outline is based on the UNs World Programme of Action Concerning Disabled Persons. A person is considered to have some disability if he/she suers a permanent or long term mental or physical functional alteration that, considering age and social conditions, it causes considerable disadvantages for a proper familiar, social, educational or labour integration. The law establishes an Integral Protection System
16

for people with disabilities,

that guarantees medical attention, education, rehabilitation (physical, psychic, social, economical and professional rehabilitation), and social security, all of which has the objective of neutralize the disadvantages that might be cause by disability. There is also the Honorary National Commission for Disability, which depends of the
16

Law No 16.095. Republic of Uruguay, 1989.

30

Ministry of Public Health and counts with the participation of a number of governmental entities, including commissionaires of the Ministry of Education and Culture, the Ministry of Labour and Social Security, among others. This commission is in charge of the coordination of the State actions involving people with disabilities, such as rehabilitation and social integration of the disabled. The law contemplates, as well, an assistance pension for people with disability that are unable of working and making a living; and a transitory subsidy for partial disability, in certain circumstances.

3.4.1
17

Uruguays First National Survey on People with Disability

On August 2003, the Honorary National Commission for Disability and the Uruguays National Institute of Statistics (Instituto Nacional de Estad sticas - INE-), design the First National Survey on People with Disability that was to be included in the Households Survey. The objective of the survey was to obtain information about physically and mentally disabled population, in order to measure the relative weight of the dierent kinds of disability, and to facilitate de formulation of plans to solve the problems face by this group of population, to improve their life conditions and to facilitate their social integration. The denitions of disability and related terms used in this investigation correspond to the ones in the International Classication of Functioning, Disability and Health (ICF) which was promulgated by the World Health Organization and the Pan American Health Organization (PAHO-WHO, 2001).
17

Encuesta Nacional de Personas con Discapacidad. Instituto Nacional de Estad stica, Rep ublica

Oriental del Uruguay. Montevideo, 2004.

31

The survey was applied between September 2003 and August 2004, to 18,300 households and 56,000 individuals. Here we present some of the most important results of the study: National prevalence of Disability: 7,6% of the population in Uruguay live with a disability, this means 210,400 individuals. Disability per age range: Disability is more frequent in older adults (65 years and up) than in the rest of the population. Disability according to age and gender: Until age 30, disability is more predominant in males than in females. In the 30 to 49 age group they level o and from 50 on it inverts; there are more women with disability than men. Personal Income: 86,9% of the people with disability receive some kind of income. 53,2% of the individuals with disability receive some transfer from government. Disability and work: 19,6% of the people with disability over 14 are participates in the labour market, compared to the 62,4% of people without disability that are active in the labour market. The gap between population with and without disability that are insert in the labour market, is bigger for women than for men. 16,5% of economically active population with disability is engaged in gainful employment. Disability and education: 88% of the individuals, between 4 and 15, years old with disability are currently studying. This means 7 points less than population without disability. 37,7% of the disabled population that is 25 years and up, has none or low instruction level, compared with 12,6% of population without disability. 32% of people with disabilities have completed primary education. Access to health, social and rehabilitation services: 99% of the population with disability had had access to some health, social and rehabilitation services in the last year. Almost 50% of the individuals with disability had received services in the public health system.

32

The main drawback of the FONADIS study and the Uruguayan one is the lack of important socio-economic information. In the Chilean case they did not collect information on any form of income (wages, pensions, subsidies, etcetera), while in the Urguayam case they did not use it. Also, the FONADIS study did not ask about any labor information. So, in their study it is not possible to establish employment and unemployment status, labor market discrimination and poverty, for example. In parallel, the Uruguayan study did not pay attention to socio-economic issues. On the contrary, the main focus of this study is the socio-economic impact of disability, and this will be the centre of our attention in what follows.

Labour Market and Disability

Labour market performance of individuals with disabilities may be aected through several channels, including wages, participation, job opportunities and unemployment. This section examines how people with disabilities perform in the labour market. On one hand, an individual with disability may face diculties to have access to formal education, which limits their human capital accumulation, productivity and labour market options. In addition, in LDCs the individuals with disabilities have less public resources available that allow them an appropriate participation in social activities. Usually, a similar picture occurs with job characteristics, many working places are simply not appropriate for individuals with disability due to many rms not having physical resources, space and environment appropriate for them. On the other hand, for those individuals that are actually working, they may face discrimination in the labour market or they may experience a higher probability of being unemployed. Finally, job quality varies according to individual characteristics. All these labour market characteristics and their impact on labour market opportunities for disabled individuals are examined below. 33

As it was mentioned in section 2.3, for the case of Uruguay we have two denitions of disabilities: severe and mild. The denitions come from the survey, where mild disability corresponds to diculties to certain activity (speak, listen, see, walk, etc.), whereas severe disability corresponds to inability to. We call all disability both severe and mild forms. For the case of Chile we only have available in CASEN 2003 information for an all disability denition.

4.1

Eects of Disability on Education

As it was discussed above, individuals with some physical or psychological limitation could face signicant obstacles in the access to formal education. This is particularly important because people facing less access to human capital will experience less opportunities in the labour market. This can be viewed as a long-run eect of disability. Table 5 shows the average years of schooling for the whole population as well as for those individuals participating in the labor market. For both countries people with disabilities exhibit less education. In addition, for those who were able to participate in the labour market the dierence is equivalent to two years of formal education.

Another way to illustrate the eects of disability on education is through a measure of education lag. Table 6 presents the average years of education for individuals aged between 18-21 years. This table also divides the sample between individuals with and without disabilities. Finally, the information is also divided by quintiles of per capita income to examine dierences across the income distribution. Table 7 resumes the same information for Uruguay where the two denitions of disability are used. In the top panel of Table 6 we present the years of education of people aged 1821 years who should have already completed secondary education (12 years in Chile). individuals with disabilities show 7,5 years of schooling, which is less than primary education. However, those with no disabilities exhibit near to 12 years of schooling with no lag in formal education. In addition, there is no evidence of educational lag 34

Table 5: Education of workers: Chile and Uruguay

Average years of Education of workers Male CHILE (all disability) with disability without disability Total URUGUAY (severe disability) with disability without disability Total URUGUAY (all disability) with disability without disability Total 7,3 9,2 9,2 8,6 10,3 10,3 7,9 9,7 9,7 6,9 9,2 9,2 8,5 10,3 10,3 7,4 9,7 9,7 8,6 10,8 10,8 9,1 11,6 11,6 8,8 11,1 11,1 Female Total

Sourcers: Chile, CASEN 2003; Uruguay ECH 2003-2004.

when a family member is disable. Finally, the average years of schooling do not vary signicantly across quintiles. However, these results should be taken carefully. As it will be discussed below in section 5, households in the richest quintiles exhibit a lower percentage of members with disabilities.

A similar pattern is observed for those individuals aged 22-30 years old. However, in this group of age, individuals with disabilities show less education than in the top panel. This result may be interpreted as younger cohorts having better access to formal education. Table 7 summarizes the same exercise for Uruguay. Although the magnitude vary respect to the Chilean case, the results are similar. First, individuals with disabilities exhibit lower education attainment in the examined age categories. Second, when a family member suers a disability this seems to have almost no eects on the education level of the other family members. Third, there is no signicant dierences across

35

Table 6: Education Lag: Chile

Education-Cicle Lag: CHILE Age 18 to 21 (Secondary Education) Quintile Without Disability I II III IV V Total 10,7 11,2 11,7 12,2 12,8 11,7 With Disability 6,4 6,9 8,8 8,0 7,3 7,5 From Hh. without member w/disab. 10,6 11,2 11,7 12,1 12,8 11,7 From Hh. with member w/disab. 10,2 10,8 11,1 12,1 12,2 11,0

Note: Quintiles based on per capita income by individuals

Education-Cicle Lag: CHILE Age 22 to 30 (Tertiary Education) Quintile Without Disability I II III IV V Total 9,7 10,7 11,7 12,9 14,8 12,2 With Disability 5,1 5,6 6,2 6,5 10,5 6,4 From Hh. without member w/disab. 9,6 10,6 11,6 12,8 14,8 12,1 From Hh. with member w/disab. 9,2 10,4 11,6 12,9 14,0 11,3

Note: Quintiles based on per capita income by individuals

36

the income quintiles. The most important result in Uruguay is given by the disability denitions. As it is expected, the educational gap when the disability is severe is much higher than under the all disability denition. This is important because by examining the Uruguayan case we can realize how important is to move on to a more comprehensive denition in the household data bases. To improve public policies a convincing denition must be incorporated in surveys.

Table 7: Education Lag: Uruguay

Education-Cicle Lag: Age 18 to 21 (Secondary Education) URUGUAY (severe disability) Quintile Without Disability I II III IV V Total 8,0 8,8 9,7 10,4 11,6 9,5 With Disability 4,3 5,6 3,6 4,2 8,2 4,9 From Hh. without member w/disab. 7,9 8,8 9,7 10,3 11,6 9,5 From Hh. with member w/disab. 7,4 8,4 9,8 10,1 11,0 8,5 Without Disability 8,0 8,9 9,7 10,4 11,6 9,5 URUGUAY (all disability) With Disability 4,9 6,4 5,7 6,6 9,8 6,2 From Hh. without member w/disab. 7,8 8,9 9,7 10,4 11,6 9,5 From Hh. with member w/disab. 7,7 8,4 9,4 9,9 11,2 8,8

Note: Quintiles based on per capita income by individuals

Education-Cicle Lag: Age 22 to 30 (Tertiary Education) URUGUAY (severe disability) Quintile Without Disability I II III IV V Total 7,7 8,7 9,9 11,2 13,1 10,1 With Disability 4,4 5,3 4,2 5,2 5,5 4,8 From Hh. without member w/disab. 7,6 8,7 9,8 11,1 13,1 10,0 From Hh. with member w/disab. 7,6 8,1 9,4 11,8 13,1 9,0 Without Disability 7,7 8,7 9,9 11,2 13,2 10,1 URUGUAY (all disability) With Disability 5,6 6,6 5,9 7,5 7,1 6,3 From Hh. without member w/disab. 7,6 8,7 9,8 11,2 13,1 10,1 From Hh. with member w/disab. 7,5 8,5 9,4 10,8 13,0 9,2

Note: Quintiles based on per capita income by individuals

4.2

Wages, participation, return to education and disability

The main indicator of labour market performance is the wage the individual earns. Wage depends on many factors, although it mainly represents productivity. The productivity of an individual depends on his human capital, the matching between his specic skills and his job, his bargaining capabilities, labour market structure, and any eect of discrimination he may suer, among others.

37

The disability may generate, in the rst place, having a lower productivity than an individual without disability because of the nature of the job. Second, an individual with disability may face dierent problems in order to obtain a certain matching between his abilities and his job. Third, individuals with disabilities may work a different number of hours than non-disabled ones (they may even not participate at all in the labour market). Fourth, individuals with disabilities may have dierent levels of human capital that may be caused by their condition. To address these questions, we estimated standard Mincer equations and labour market participation models. This framework allows to control by standard productivity measures, namely experience and education, in order to isolate the eect of the disability on the wage the individuals receive.18 We observe for Chile in Table 8 that participation rate is 77% for males and only 46% for females considering the whole population (rst column). Those gures increase to 93% and 67% for household heads correspondingly. Males with all disability participate only 43% and females only 23% (third column, upper panel). The less important fall in participation for females relates to their lower overall participation rate. The proportions in reduced participation rates are similar for household heads (third column, lower panel). Individuals who have a member of household with a disability have smaller participation rates (last column), although the dierence is not particularly signicant for males nor females.

Given that for Uruguay two denitions of disability are used, we have two main panels accordingly in Table 9. By focusing on the denition of all disability, we observe that participation rate is 84% for males and 62% for females considering the whole population (rst column). Those gures increase to 92% and 75% for household heads, correspondingly. Males with all disability participate only 44% and females only 33% (third column). The less important fall in participation for females relates to their lower overall participation rate. Proportions in reduced participation rates
18

Experience corresponds to potential experience, i.e., age minus years of education. Through-

out the rest of the paper this will be the denition of experience.

38

Table 8: Chile: Labour Market Participation

CHILE Participation Rate - All Disability Population All Both genders Males Females Household Head Both genders Males Females 87 93 67 88 94 68 57 64 39 88 94 69 83 90 64 61 77 46 62 79 47 34 43 23 63 79 47 60 78 44 No Disab. Disab. No Disab. Hh. Disab. Hh.

are similar for household heads (third column). Individuals who have a member of household with a disability have smaller participation rates (last column), although the dierence is not particularly big for males nor females, except for females who are household heads.

4.2.1

Econometric Models

In the rst place, we estimate the eect of disability on the wage of disabled individuals. For this purpose, we will estimate a model such as:
h wi = 0 + 1 Xi + 2 Ddi + ui ,

(1)

h where wi is the hourly wage of individual i in household h, Xi is a vector of indi-

vidual characteristics that represent the individuals productivity, Ddi is a variable which equals 1 if individual i is disabled and otherwise equals 0, and ui is an error term. In this framework, we may distinguish between dierent levels of severity of the disability by making a breakdown of Ddi into Dhdi for severe disability and Dldi for 39

Table 9: Uruguay: Labour Market Participation

URUGUAY Participation Rate - Severe Disability Population All Both genders Males Females Household Head Both genders Males Females 86 91 73 87 92 74 34 38 29 87 92 74 84 92 66 71 83 62 73 84 62 20 23 16 73 84 63 68 85 54 No Disab. Disab. No Disab. Hh. Disab. Hh.

Participation Rate - all Disability No Disab. All Both genders Males Females Household Head Both genders Males Females 88 92 75 54 59 45 88 93 76 85 91 69 73 85 63 39 44 33 73 84 63 72 85 60 Disab. No Disab. Hh. Disab. Hh.

40

all disability. Since many disabled individuals may decide not to participate in the labour market, we will attempt to identify the eect of being disabled on the probability of not being participating in the labour market. For this purpose, we will estimate a participation model such as: ph i = f (0 + 1 Xi + 2 Ddi ), (2)

where ph i is the probability of individual i in household h of being participating in the labour market, and f () is a probability function. The econometrics models are estimated using a Probit model and the standard errors are corrected for heteroscedastity. Finally, the tables show the marginal eects. In addition to the eect of disability on labour market performance of those who are disabled, there is an impact on labour market performance of those members of the household who are not disabled. This could happen through dierent channels. First, disabled individuals may need help for their basic needs (mainly those with severe disabilities), and it is usually another member of the household who takes on that task. This may aect the probability of that other member to participate in the labour market. Also, it may aect the number of hours that other member may decide to work. Finally, it may aect the type of job that other individuals get, where exibility may be a highly desirable characteristic, and matching of abilities may be sacriced for it. For this purpose, we will estimate models similar to (1) and (2) identifying those individuals whose household has a disabled member. More precisely, we will estimate,
h wi = 0 + 1 Xi + 2 Ddh + ui ,

(3) (4)

ph = f (0 + 1 Xi + 2 Ddh ), i

where Ddh is equal to 1 if there is a member of household h that has a disability.19

19

Equations (3) and (4) will be estimated for Uruguay using both denition of disability

41

4.3

Earnings and returns

The regression of wage equations for Chile are summarized in Table 10. In the rst column we present the basic model,20 where most of the variables are statistically signicant at the 95% condence. Experience has a positive eect on hourly wage, there is a 19% gender gap in favour of males. The return to schooling is near to 14%, which is consitent with other studies in Chile.21

20

Age is not included in the regressions since potential experience is used. Regional controls were

also used, although they were discarded because they were not statistically signicant. Heckman selection models were also run for females, although the results did not vary signicantly. Hence, for the sake of simplicity, they are not presented in this paper. 21 See Contreras (2003), Larra naga and Contreras (2001)

42

Table 10: Chile: OLS Regressions of Hourly Wage

(1) All 0.021 (18.76)** 0.000 (0.23) 0.142 (97.85)** 0.193 (21.25)** -0.085 (2.22)* -0.083 (5.88)** -0.182 (2.11)* (5.16)** (2.87)** -0.224 (2.39)* 0.019 (0.09) -0.092 (2.05)* 4.868 (209.96)** 79302 0.32 0.33 0.29 0.32 0.33 53783 25519 77921 52767 0.30 (180.62)** (144.62)** (209.45)** (179.66)** (145.71)** 25154 4.966 5.030 4.870 4.972 5.024 4.869 (209.97)** 79302 0.32 4.966 (180.62)** 53783 0.33 5.03 (144.63)** 25519 0.29 4.871 (209.38)** 77921 0.32 -0.125 (2.10)* 4.973 (179.59)** 52767 0.33 -0.034 (0.50) 5.024 (145.69)** 25154 0.3 -0.092 -0.066 (2.02)* (1.1) (1.88) -0.088 -0.085 -0.076 -0.075 (1.63) (21.17)** (21.25)** -0.086 (1.07) -0.078 (5.34)** -0.086 (4.64)** -0.064 (2.68)** 0.193 0.193 (78.16)** (59.39)** (98.28)** (78.10)** (60.15)** (97.84)** (78.15)** 0.144 0.137 0.142 0.144 0.138 0.142 0.144 (3.96)** (4.19)** -0.04 (3.60)** (4.15)** -0.21 (3.94)** (4.19)** 0.137 (59.39)** 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 (19.35)** (5.75)** (18.48)** (18.96)** (5.81)** (18.74)** (19.33)** (5.75)** 0.027 0.010 0.020 0.027 0.011 0.021 0.027 0.01 Males Females All Males Females All Males Females All 0.02 (18.48)** 0.000 -0.03 0.142 (98.20)** 0.193 (21.16)** (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Males 0.027 (18.95)** 0.000 (3.59)** 0.144 (78.02)** (12) Females 0.011 (5.82)** 0.000 (4.14)** 0.138 (60.13)**

CHILE

LN Wage/HR

Experience

Experience2

Education

Dummy Gender (Male=1)

Dummy Disab.All

Dummy Disab.in Hh.All

Disab.*Ethnic orig.

Disab.in Hh*Ethnic orig.

43

Constant

Observations

R-squared

Robust t statistics in parentheses

* signicant at 5%; ** signicant at 1%

Most importantly for this study, everything else the same, individuals with the all disability obtain 8,5% less than the rest. The next two columns conrm that the disability gap is almost constant for both genders. When we consider individuals who have a member of the household with a disability (columns 4, 5 and 6), we observe that there is wage gap of 8.3% for all (9,2% for males, 6,6% for females). We interpret these results as the outcome of the bargaining process between employer and employee, where the employee might be more willing to accept lower wage in exchange of better labour conditions. Among those conditions we could name institution health insurances, shorter distance from home, exible working hours. Finally, columns 7 to 12 show that there are signicant eects of the interaction between Ethnicity and disability. The evidence suggests that, controlling for human capital, disabled-indigineous individuals receive 20% less in the labor market. Half of this negative eect is obtained when a family member has a disability in an ethnic household.22 It is interesting that such impact is mainly explained by males. A potential explanation is that indigineous-disabled-females are excluded from the market. Patterns for self-employed workers were very close to the rest, so we do not present separated results for them.

Table 11 presents the Mincer equations separating the sample according to disability. By using the previous specication, this table allows us to examine dierences in the return to education. Individuals without disabilities exhibit a return to schooling of 14,2%. While males show a premium of 14,5%, females obtain 13,8%. The skill premium provided in the market vary signicantly when workers are disabled. For the whole sample of disabled people, the return to education is 9,4%, ve points less than the rest of society. Separating by gender, males have a return of 10,2%, while females only obtain 7,1%.
22

According to Montero, Garc es and Agurto (2006), in Chile, the ethnic wage discriminatio is

9,18%.

44

Table 11: Returns to Education: Chile

(1) All Experience Experience2 Education Dummy Gender (Male=1) Constant Observations R-squared Robust t statistics in parentheses * signicant at 5%; ** signicant at 1% 0,021 (18.62)** 0,000 (0.08) 0,142 (98.29)** 0,194 (21.20)** 4,855 (208.56)** 77921 0,32 4,955 (179.08)** 52767 0,33 5,013 (144.85)** 25154 0,30 (2) Without Disability Males 0,027 (19.07)** 0,000 (3.69)** 0,145 (78.26)** Females 0,011 (5.88)** 0,000 (4.10)** 0,138 (60.06)** All 0,015 (1.42) 0,000 (0.42) 0,094 (7.29)** 0,174 (2.04)* 5,466 (25.29)** 1381 0,17 5,295 (24.94)** 1016 0,21 6,239 (13.17)** 365 0,13 (3) (4) (5) only w/ All Disability Males 0,034 (3.02)** 0,000 (1.82) 0,102 (7.15)** Females -0,022 (1.06) 0,000 (1.22) 0,071 (2.50)* (6)

The regression of wage equations for Uruguay are summarized in Table 12. In the rst column we present the basic model, where all variables are statistically signicant at the 95% condence. Experience has a positive eect on hourly wage, there is 18% gender gap in favour of males, which is similar to the gure for Chile (20%). In Uruguay the return to schooling uctuates between 12% and 13%, lower than the return to education exhibited in Chile.

45

Table 12: Uruguay: OLS Regressions of Hourly Wage

(1) All 0.045 (29.92)** -0.001 (18.68)** 0.128 (86.02)** 0.195 (18.10)** -0.261 (3.22)** -0.142 (6.09)** -0.182 (4.74)** (5.21)** (3.37)** -0.177 (3.58)** -0.18 (2.99)** -0.137 (8.48)** 2.833 (112.70)** 21026 0.29 0.31 0.27 0.3 0.31 0.27 11899 9127 20920 11831 9089 (94.37)** (82.26)** (112.46)** (94.11)** (81.87)** 2.894 3.025 2.844 2.906 3.035 2.836 (112.80)** 21026 0.3 2.896 (94.46)** 11899 0.31 3.027 (82.28)** 9127 0.27 2.861 (111.89)** 20492 0.3 -0.163 (7.84)** 2.936 (93.45)** 11598 0.32 -0.098 (3.83)** 3.032 (81.42)** 8894 0.28 -0.151 -0.13 (2.86)** -1.38 -0.315 -0.149 (18.16)** (18.05)** 0.196 0.194 (64.13)** (56.08)** (85.49)** (63.70)** (55.77)** (85.90)** (64.07)** (56.02)** 0.131 0.122 0.127 0.131 0.121 0.128 0.131 0.122 (16.68)** (9.80)** (18.67)** (16.70)** (9.77)** (18.57)** (16.62)** (9.71)** -0.001 0 -0.001 -0.001 0 -0.001 -0.001 0 (26.02)** (15.99)** (29.89)** (26.04)** (15.96)** (29.92)** (26.06)** (15.96)** 0.053 0.037 0.045 0.053 0.037 0.045 0.053 0.037 0.046 (29.80)** -0.001 (18.55)** 0.127 (84.79)** 0.194 (17.89)** Males Females All Males Females All Males Females All (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Males 0.052 (25.55)** -0.001 (16.19)** 0.13 (62.73)** (12) Females 0.038 (16.38)** 0 (10.16)** 0.122 (55.82)**

URUGUAY

LN Wage/HR

Experience

Experience2

Education

Dummy Gender

Dummy Disab.Severe

Dummy Disab.in Hh.Severe

Dummy Disab.All

Dummy Disab.in Hh.All

46

Constant

Observations

R-squared

Robust t statistics in parentheses

* signicant at 5%; ** signicant at 1%

Individuals with a severe disability obtain 26% less than the rest. However, the severedisability gap is 32% for males and 15% for females. When we use the all disability denition, which is comparable with the denition contained in the Chilean database (column 7), the disability gap reduces to 18%. The next two columns, 8 and 9, show that the all-disability gap is almost constant for both genders. It is interesting to note the similar eects across countries and across gender. When we consider individuals who have a member of the household with a severe disability (columns 4, 5 and 6), we observe that there is wage gap of 14% for all (15% for males, 13% for females). Surprinsingly, the eect of the presence of a person with all disability in the household generates a wage gap of 14% on average (16% for males and 10% for females). Patterns for self-employed workers were very close to the rest, so we do not present separated results for them.

Table 13 present the Mincer equations for Uruguay when the sample is divided according to disability. In Uruguay, individuals with no disability receive a return to education of 12,8%, while males and females obtain 13,1% and 12,3% respectively. However for individual with a severe disability the return to schooling drops by 3 points. In addition, the drop in the rate of return is lower when the all disability denition is used.

47

Table 13: Returns to Education: Uruguay

(1) Without Disability All 0,046 (29.98)** -0,001 (18.63)** 0,128 (86.00)** 0,195 (17.89)** 2,821 (111.38)** 20419 0,3 0,31 0,28 0,23 0,2 0,34 11593 8826 106 68 38 (93.66)** (81.04)** (9.46)** (7.73)** (9.81)** 428 0,12 2,89 3,001 3,121 3,005 3,482 3,095 (12.43)** (-0.20) (2.72)** 3,016 (10.35)** 233 0,17 3,363 (8.68)** 195 0,08 -0,033 0,238 (64.05)** (56.21)** (3.79)** (2.38)* (3.74)** (6.72)** 0,131 0,123 0,093 0,087 0,100 0,101 0,121 (6.51)** (16.35)** (10.08)** (1.11) (0.78) (0.49) (1.19) (1.99)* -0,001 0,000 0,000 0,000 0,000 0,000 -0,001 (25.77)** (16.38)** (1.66) (1.38) (0.53) (2.02)* (2.50)* 0,053 0,038 0,034 0,038 0,014 0,028 0,045 0,01 (0.5) 0,000 (0.17) 0,088 (3.68)** Males Females All Males Females All Males Females only w/ Severe Disability only w/ All Disability only (2) (3) (4) (5) (6) (7) (8) (9)

Experience

Experience2

Education

Dummy Gender (Male=1)

Constant

Observations

R-squared

Robust t statistics in parentheses

* signicant at 5%; ** signicant at 1%

48

4.4

Participation

Table 14 presents the results of the regression of participation equations (Probit models, marginal eects). In the rst column we have the basic model, with all variables statistically signicant. Experience is positively correlated with participation, males participate more than females in labour market. As expected, a more educated individual exhibit higher participation rates. We observe an increase in 38% on the probability of participating for males and a 30% decrease of probability of participating for individuals with a disability (all disability). Separated regressions for males and females in columns 2 and 3 conrm the results and show how the eect of disabilities is much larger for males (46%) than for females (15%). This may be related to the fact that females participate much less in the labour market. Interestingly, the presence in the household of an individual with a disability reduces male participation only in 2%, and has no signicant eect for females. Again, this may be due to the low participation rate of females.

Table 15 presents the results of the regression of participation equations (Probit models, marginal eects) for Uruguay. In the rst column we have the basic model, with all variables statistically signicant. Similar to Chile, in Uruguay there is a positive correlation between participation and experience. Males exhibit a larger participation rates than females, but signicantly lower than in Chile. Education is also positively correlated with participation. According to Table 15, this impact is less important than in Chile.

On the other hand, individuals with a severe-disability show a 57% lower probability of working. Separated regressions for males and females in columns 2 and 3 conrm the results and show how the eect of disabilities is much larger for males (68%) than for females (43%). This may be related to the fact that females participate much less in the labour market. When using the denition of all disability (columns 7, 8 and 9) 49

Table 14: Chile: Probit Regressions of Participation in Labour Force

CHILE Participation (1) All Experience Experience Education Dummy Gender # working people in Hh. # children <15 years old Dummy Disab.All Dummy Disab.in Hh.All Observations Robust z statistics in parentheses * signicant at 5%; ** signicant at 1% 167824 83143 84681
2

(2) Males 0.04 (78.87)** -0.001 (70.01)** 0.009 (11.59)**

(3) Females 0.031 (41.36)** -0.001 (34.73)** 0.034 (32.13)**

(4) All 0.047 (85.96)** -0.001 (73.43)** 0.024 (31.28)** 0.382 (82.23)**

(5) Males 0.039 (79.31)** -0.001 (70.17)** 0.005 (7.19)**

(6) Females 0.032 (41.29)** -0.001 (34.62)** 0.034 (30.69)**

0.046 (86.09)** -0.001 (73.37)** 0.026 (34.73)** 0.382 (83.02)** 0.179 (63.07)** -0.017 (8.22)** -0.309 (21.70)**

0.096 (36.81)** 0.009 (4.23)** -0.455 (25.96)**

0.209 (53.24)** -0.047 (15.17)** -0.154 (7.53)**

0.178 (61.74)** -0.019 (9.11)**

0.09 (35.72)** 0.006 (2.94)**

0.212 (52.56)** -0.048 (15.33)**

-0.001 -0.15 161804

-0.015 (2.16)* 79860

0.007 -0.59 81944

50

we obtain a 34% average reduction in the probability of participating in the labour market (42% for males, 24% for females). Interestingly, the presence in the household of an individual with a severe disability has no signicant eect on participation (columns 4, 5 and 6). However, the presence in the household of an individual with all disability (columns 10, 11 and 12) increases average participation in 2% (2% for males and no signicant eect for females).

51

Table 15: Uruguay: Probit Regressions of Participation in Labour Force

(1) All 0.041 (66.94)** -0.001 (62.37)** 0.012 (13.99)** 0.236 (46.45)** 0.148 (43.90)** -0.025 (11.75)** -0.57 (21.54)** -0.002 -0.18 -1.29 -1.12 -0.338 (22.63)** -0.423 (22.33)** -0.242 (11.28)** 0.023 (3.17)** 35281 16646 18635 34553 16243 18310 35281 16646 18635 33552 0.018 (3.25)** 15818 0.017 -1.47 17734 0.012 -0.019 (21.51)** (10.16)** -0.677 -0.43 -1.8 (12.35)** (12.57)** (3.01)** (12.57)** (11.62)** -1.65 -0.004 -0.044 -0.026 -0.006 -0.045 -0.024 -0.003 (25.19)** (36.09)** (43.23)** (24.16)** (35.93)** (43.93)** (24.77)** 0.075 0.193 0.144 0.068 0.192 0.148 0.074 (46.76)** (46.28)** 0.193 (36.25)** -0.044 (12.36)** 0.231 0.233 -1.71 (15.28)** (12.80)** -0.43 (14.67)** (15.25)** (2.74)** (15.91)** 0.001 0.019 0.011 0 0.019 0.013 0.002 0.02 (49.82)** (37.80)** (62.98)** (50.02)** (38.08)** (60.96)** (48.00)** (37.25)** 0.01 (12.52)** 0.23 (46.66)** 0.139 (41.77)** -0.027 (13.08)** 0.06 (22.85)** -0.006 (3.30)** 0.19 (34.99)** -0.046 (12.86)** -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 (62.81)** (52.90)** (40.22)** (67.49)** (53.10)** (40.49)** (66.18)** (51.63)** (39.96)** (67.68)** 0.031 0.039 0.04 0.029 0.039 0.041 0.031 0.039 0.04 Males Females All Males Females All Males Females All (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Males 0.028 (52.30)** -0.001 (49.36)** 0 -0.04 (12) Females 0.04 (40.57)** -0.001 (37.84)** 0.019 (14.61)**

URUGUAY

Participation

Experience

Experience2

Education

Dummy Gender

# working people in Hh.

# children <15 years old

Dummy Disab.Severe

Dummy Disab.in Hh.Severe

52

Dummy Disab.All

Dummy Disab.in Hh.All

Observations

Robust z statistics in parentheses

* signicant at 5%; ** signicant at 1%

4.5

Unemployment

Another important aspect of the role of labour market on individual welfare is unemployment. People may face dierent opportunities in the labour market experiencing signicant dierences in unemployment rates and unemployment spells. Unemployment according both surveys refer to employment status the week previous to the interview. Unemployment occurs because people actively looking for a job do not nd a job that satises them or, more dramatically, do not nd a job at all. Among individuals with disability it would be crucial to dierentiate how much of that unemployment occurs because of discrimination and/or inadequate working places or working conditions (discouraging job search), and how much of that unemployment is due to the fact that they live in poor households and desperately need more income. Unfortunately, it is not possible to dierentiate those eects within the context of the available data. A particular set of questions addressed to individuals with disability would be required to give a proper answer. The, we will just attempt to report the incidence of disability on unemployment, but we will not be able to disentangle the causes of it. The bottom panel of Table 16 shows the descriptive statistics for Uruguay. According to the household data in 2003, the unemployment rate was about 15% for people without any disability. However, for individuals with a severe disability the rate was almost 25%. When the all disability dention is used, the unemployment rates reduced 15% showing almost no dierences with the whole population.

An interesting result is observed across gender. Females exhibits larger unemployment rates, however, such dierences are more important for individuals with no disabilities. The evidence suggests that unemployment is a phenomena more related to gender than disability. A similar result is observed when someone in the household is disabled, unemployment rates are higher in those families, but this indirect eect is lower than the direct impact. On the other hand, Table 18 shows the Probit model estimating the probability of being unemployed. The model used the same explanatory variables described in 53

Table 16: Unemployment Rates: Chile and Uruguay

Unemployment rate Unemployment rate of individuals with and without disability Male CHILE (all disability) with disability without disability Total 11,4 8,3 8,4 20,3 12,6 12,7 14,2 9,9 10,0 10,8 8,1 8,4 15,7 12,4 12,7 12,7 9,7 10,0 Female Total Unemployment rate of individuals with a household member with and without disability Male Female Total

URUGUAY (severe disability) with without Total 23,6 11,3 11,4 26,4 18,5 18,5 24,6 14,6 14,6 13,4 11,3 11,4 26,6 18,0 18,5 19,2 14,3 14,6

URUGUAY (all disability) with without Total 11,8 11,3 11,3 18,4 18,5 18,5 15,0 14,5 14,6 11,0 14,5 11,3 17,7 22,3 18,0 14,0 18,0 14,3

Sourcers: Chile, CASEN 2003; Uruguay ECH 2003-2004.

the previous section. The results suggest that individual with more experience have less probability of being unemployed. However, this eect decreases with age. Not surprisingly, the higher the educational level, the lower is the probability to be classied as unemployed. Females not only exhibit lower wages and participation rates, but they are more likely to be unemployed. Individuals with a severe disability are more likely to be unemployed. This eect is also observed for any family member under such condition. But, this eect is lower when the disabled is the same individual. However, this result is not observed for females. Women also see increased their probability of being unemployed when they are disabled, but this eect is almost the same when someone else within the household is disabled. Finally, as it is expected, by using the all disability denition the impact of disability on unemployment is reduced, nevertheless, the pattern remains the same.

54

Table 17: Unemployment Probit Regressions: Chile

Unemployment Probability - Marginal Eects (Dependent variable: 1 for unemployed, 0 otherwise) (1) All Experience Experience2 Education Dummy Gender (Male=1) Dummy Disab.All Dummy Disab.in Hh.All Observations Robust z statistics in parentheses * signicant at 5%; ** signicant at 1% 97012 64821 32191 -0,008 (21.18)** 0,000 (13.60)** -0,007 (15.08)** -0,042 (12.13)** 0,054 (4.27)** 0,034 (2.68)** 0,099 (3.49)** 0,019 (3.52)** 97012 0,016 (2.69)** 64821 0,024 (2.27)* 32191 (2) Males -0,008 (17.57)** 0,000 (12.86)** -0,006 (10.53)** (3) Females -0,009 (11.51)** 0,000 (5.23)** -0,011 (11.00)** (4) All -0,008 (21.09)** 0,000 (13.62)** -0,007 (14.97)** -0,041 (12.08)** (5) Males -0,008 (17.50)** 0,000 (12.84)** -0,006 (10.42)** (6) Females -0,009 (11.47)** 0,000 (5.31)** -0,011 (10.97)**

55

Table 18: Unemployment Probit Regressions: Uruguay

(1) All -0,016 (29.34)** 0,000 (19.49)** -0,015 (22.31)** -0,082 (17.95)** 0,07 (2.30)* 0,027 (2.82)** (0,86) (3.07)** 0,047 (3.19)** 0,046 (2.72)** 0,052 (2.03)* 0,02 (3.10)** 25275 13727 11548 25275 13727 11548 25275 13727 11548 25275 0,013 (1,64) 13727 0,031 (2.86)** 11548 0,009 0,051 (2.59)** (0,78) 0,085 0,047 (17.89)** (17.92)** -0,082 -0,082 (10.10)** (21.07)** (22.03)** (10.15)** (20.68)** (22.31)** -0,008 -0,024 -0,015 -0,008 -0,023 -0,015 -0,008 (10.11)** (18.41)** (9.48)** (19.48)** (18.43)** (9.45)** (19.39)** (18.39)** 0,000 0,000 0,000 0,000 0,000 0,000 0,000 (24.34)** (17.47)** (29.32)** (24.36)** (17.42)** (29.34)** (24.37)** 0,000 (9.37)** -0,024 (21.07)** -0,016 -0,016 -0,016 -0,016 -0,016 -0,016 -0,016 -0,016 (17.45)** Males Females All Males Females All Males Females (2) (3) (4) (5) (6) (7) (8) (9) (10) All -0,016 (29.26)** 0,000 (19.48)** -0,015 (21.84)** -0,082 (17.89)** (11) Males -0,016 (24.31)** 0,000 (18.41)** -0,008 (9.93)** (12) Females -0,016 (17.39)** 0,000 (9.46)** -0,023 (20.62)**

Unemployment Probability - Marginal Eects

(Dependent variable: 1 for unemployed, 0 otherwise)

Experience

Experience2

Education

Dummy Gender (Male=1)

Dummy Disab.Severe

Dummy Disab.in Hh.Severe

Dummy Disab.All

Dummy Disab.in Hh.All

56

Observations

Robust z statistics in parentheses

* signicant at 5%; ** signicant at 1%

Table 16 resume descriptive statistic of unemployment in Chile. The top panel of this table indicates that the unemployment rate according to CASEN 2003 was 10%, being more sigbnifcant for females (12.7). Individuals with disabilities present a higher unemployment rate (14,2%), such rates is 20% for females with disabilities. A Probit model for unemployment is presented in Table 17. The dependent variable is equal to one when the individual is unemployed and zero otherwise. Individuals with more human capital (education and experience) are less likely to be unemployed. On the contrary, females exhibit a higher probability of being unemployed. On the other hand, when a male has a disability, he experiences a higher probability of unemployment (3,4 points). More important is the situation for females. They have increased the probability of being unemployed in 10 additional points. Finally, when a family member has a disability, this eects is positively correlated with a higher unemployment rate. The negative impact on females is more than twice the negative eects on males.

Poverty and Income Distribution

Due to its eects on labour market participation and performance, disability may have important eects on poverty and income distribution. In fact, poverty is measured by adding up the incomes of all members of a household, and then dividing it by the number of individuals of the household to obtain a per capita income and nally to compare it to a poverty line. Since the number of households with a member with disability is relatively small, it is unlikely that the overall poverty rate may be aected signicantly by disability. However, disability can be a major cause to fall into destitution. By the same token, disability may be a relevant element to determine where in the income distribution ladder a household is more likely to be. In this section we analyse what are the poverty rates of households with members with disabilities and if disability is a signicant determinant of poverty. In addition we determine where household with disabled members are situated in the overall income distribution.

57

5.1

Poverty Incidence

Table 19 presents poverty rates for both Chile and Uruguay in 2003 and 2003-2004 respectively. In the left hand side, we observe that households with a member with disability exhibit 23.4% of poverty for Chile, well above the 15.4% overall poverty rate of households. We also observe that 10.7% of households have a member with disability. In the right hand side, we observe that poverty rate for households where the head has a disability is only 16.4% (5.2% of households have a head with a disability). It is important to note that the denition of the household head is endogenous to the household. Hence, the condition of disability of a member of the household may prevent him/her to be household head. Then, this results suggest that for a person with disability to be the household head, his disability is likely not to be an impediment to be the main contributor of resources to the household. For Uruguay we observe in the left hand side of Table 19 that households with a member with severe disability have a poverty rate of 46.1% and with all disability 38.8%, in both cases well above the 24.9% overall poverty rate for households. We nd that 4.8% of households have a member with severe disability and 9.3% with all disability. In the right hand side we can note that when the household head has a severe disability poverty rate is 27%, and only 2.2% of households have a head with severe disability. However, when the household head has a all disability (11.4% of the households), poverty rate is only 18.8%, much lower than the overall poverty rate. It is worth to note that, especially in the case of Uruguay, household heads with all disability correspond mainly to elderly people.

5.2

Probability of being Poor

In addition to poverty measures, we use an asset based model to estimate the eect of having a disabled member in the household on the probability of the household of being poor. This is somehow standard in the literature of poverty reduction, hence we will not go into much detail.23 The asset framework implies four types of capital:
23

See for example Siegel (2005).

58

Table 19: Poverty Rates: Chile and Uruguay

Poverty rates for households with and without Disabled members Disabled Member of Household Without With Total Disabled Household Head Without With Total

CHILE (all disability) Poverty rate (%) % of Households URUGUAY (severe disability) Poverty rate (%) % of Households URUGUAY (all disability) Poverty rate (%) % of Households 23.5 90.7 38.8 9.3 24.9 100.0 25.7 88.6 18.8 11.4 24.9 100.0 23.9 95.2 46.1 4.8 24.9 100.0 24.9 97.8 27.1 2.2 24.9 100.0 14.8 89.3 23.4 10.7 15.4 100.0 15.3 94.8 16.4 5.2 15.4 100.0

Sourcers: Chile, CASEN 2003; Uruguay ECH 2003-2004.

human capital, nancial capital, physical capital, and access to public services and organizational capital. For human capital we use variables such as potential experience of the household head, years of education of the household head (and the squared of it), years of education of the rest of the household, gender, number of individuals in dierent age groups, and health status of the household head (not available for Uruguay). For physical capital we use ownership of the living property. We do not have available reliable information for nancial capital. Finally, we proxy access to public services and organizational capital by using urban and rural zone. In our estimates below, the dependent variable is 1 or 0, depending on the household being poor or not correspondingly. The observation unit is the household, and the assets correspond to the assets of the household. We present estimations of Probit models for Chile and Uruguay in Tables 20 and 21 respectively. Model (1) considers all households. Model (2) considers a sub-sample of households with household head without disability. Model (3) considers a dummy variable for disability only for the household head. (Models (4), (5) and (6) in Table 21 are equivalent to models (1), (2) and (3), but with a dierent denition of disability). The variables used for the regressions of probability of being poor that require more

59

explanation are the following: Poverty: 1 for a household with a per capita income lower than the corresponding poverty line (ocial poverty line for corresponding geographical area - urban, rural - in each country). Years of Education of Rest of Household: sum of years of education of other members in the household (other than the household head). Spouse present in Household: Spouse of the Household Head present in household, i.e., the household is composed by a couple plus other members. Bad Health of Household Head: Self reported health status. Own Property: The household owns the property they live in. Zone: 1 is Urban opposed to Rural. In Uruguay is Montevideo (capital) opposed to rest of the country. We nd in the Chilean case that education of the of the household head as no signicant eect on poverty. However, the years of the education of the rest of the household decrease the probability of the poor. This may be due to the fact that poor households tend to have a larger number of members. Households headed by males have lower probability of being poor. Young age members increase the probability of being poor compared to the omitted group 25-64 years old. Elderly people decrease the probability of being poor. Self reported bad health of household head has signicant and important eect, increasing the probability of being poor. Living in an own property reduces the probability of being poor, whereas living in urban areas increases it.24 The main nding in terms of the impact of disability on poverty is that it has a statistically signicant eect increasing the probability of being poor between 3% and 4% depending on the model. In the case of Uruguay we nd similar eects for education, although education of household head decreases the probability of being poor. However, disability has no
24

Both Chile and Uruguay are low-middle income countries, where poverty is concentrated not

any longer mainly in rural areas, but also in the outskirts of the big cities.

60

signicant eect on the probability of being poor for all cases but severe disability of household head. We would expect a household head with a severe disability to be replaced as a head by another household member if possible, so the fact that an individual with a severe disability is the household head may indicate lack of human capital within the household.

Table 20: Probit Regressions of Probability of Being Poor: Chile

Probability of Being Poor - Marginal Eects (Dependent variable: 1 for poor household, 0 otherwise) (1) All (2) Head without Disability Experience Education of Household Head Education of Household Head squared Years of Education of Rest of the Household Spouse present in Household Dummy Gender (Male=1) # of members in age group 0-14 # of members in age group 15-24 # of members in age group >65 Total # of members of household Bad Health of Household Head (1=Yes) Own Property (1=Yes) Zone (1=Urban) Dummy Disab.All Dummy Disab.in Hh.All Observations Robust z statistics in parentheses * signicant at 5%; ** signicant at 1% 0.036 (4.23)** 67941 0.04 (4.62)** 64103 67941 -0.001 (6.05)** 0.003 (1.89) -0.001 (11.35)** -0.005 (14.10)** 0.012 (1.58) -0.017 (2.37)* 0.066 (16.65)** 0.054 (14.18)** -0.01 (2.15)* 0.015 (3.97)** 0.07 (7.95)** -0.05 (11.44)** 0.049 (15.06)** -0.001 (5.98)** 0.003 (1.79) -0.001 (10.96)** -0.004 (13.24)** 0.012 (1.52) -0.016 (2.25)* 0.067 (16.36)** 0.053 (13.66)** -0.012 (2.43)* 0.013 (3.25)** 0.065 (6.89)** -0.047 (10.66)** 0.049 (14.56)** (3) Head with Disability -0.001 (6.45)** 0.003 (1.89) -0.001 (11.30)** -0.005 (14.94)** 0.012 (1.61) -0.018 (2.59)** 0.063 (15.80)** 0.053 (13.97)** -0.01 (2.03)* 0.019 (5.09)** 0.066 (7.57)** -0.049 (11.25)** 0.05 (15.14)** 0.032 (3.88)**

5.3

Income Distribution and Disability

Table 22 presents statistics of deciles of income distribution and disability for Chile and Uruguay. For Chile we can observe in the rst column how households with a 61

Table 21: Probit Regressions of Probability of Being Poor: Uruguay

Probability of Being Poor - Marginal Eects (Dependent variable: 1 for poor household, 0 otherwise) (1) All (2) Head without Disability Experience Education of Household Head Education of Household Head squared Years of Education of Rest of the Household Spouse present in Household Dummy Gender (Male=1) # of members in age group 0-14 # of members in age group 15-24 # of members in age group >65 Total # of members of household Own Property (1=Yes) Zone (1=Urban) Dummy Disab.Severe Dummy Disab.in Hh.Severe Dummy Disab.All Dummy Disab.in Hh.All Observations Robust z statistics in parentheses * signicant at 5%; ** signicant at 1% 18333 17936 18333 0.014 (1.16) 18333 0.018 (1.45) 16255 18333 0.012 (0.73) 0.012 (0.75) 0.017 (1.48) -0.003 (8.24)** -0.021 (5.74)** -0.001 (4.27)** -0.013 (16.30)** -0.017 (1.63) -0.017 (1.63) -0.002 (0.26) 0.049 (7.39)** -0.055 (7.49)** 0.163 (19.33)** -0.107 (14.29)** 0.103 (15.05)** -0.003 (8.18)** -0.02 (5.47)** -0.001 (4.23)** -0.013 (16.56)** -0.017 (1.6) -0.017 (1.61) -0.002 (0.29) 0.05 (7.46)** -0.052 (7.04)** 0.164 (19.58)** -0.106 (13.95)** 0.103 (14.85)** (3) Head with Disability -0.003 (8.34)** -0.02 (5.62)** -0.001 (4.35)** -0.013 (16.56)** -0.017 (1.57) -0.017 (1.69) -0.003 (0.37) 0.049 (7.39)** -0.055 (7.49)** 0.164 (19.77)** -0.107 (14.27)** 0.103 (15.04)** 0.059 (2.39)* -0.003 (8.16)** -0.021 (5.74)** -0.001 (4.25)** -0.013 (16.36)** -0.017 (1.63) -0.017 (1.63) -0.001 (0.16) 0.05 (7.37)** -0.056 (7.53)** 0.162 (19.18)** -0.107 (14.28)** 0.103 (15.05)** (4) All (5) Head without Disability -0.003 (7.54)** -0.024 (5.75)** -0.001 (3.42)** -0.013 (15.60)** -0.01 (0.83) -0.025 (2.21)* 0.007 (0.73) 0.056 (7.70)** -0.053 (6.50)** 0.159 (17.56)** -0.106 (13.09)** 0.103 (13.86)** (6) Head with Disability -0.003 (8.36)** -0.021 (5.65)** -0.001 (4.34)** -0.013 (16.55)** -0.017 (1.59) -0.017 (1.66) -0.003 (0.42) 0.049 (7.33)** -0.055 (7.51)** 0.165 (19.82)** -0.107 (14.25)** 0.103 (15.03)**

62

Table 22: Deciles of Income Distribution and Disability: Chile and Uruguay
Distribution of households with member with Disability in Deciles of per capita income distribution CHILE Decile % of Households w/ member w/disability % of Decile w/disability URUGUAY (severe disability) % of Households w/ member w/disability % of Decile w/disability URUGUAY (all disability) % of Households w/ member w/disability % of Decile w/disability

I II III IV V VI VII VIII IX X Total

15.9 14.5 13.5 12.8 11.4 9.8 7.2 6.5 5.4 3.1 100.0

11.2 10.2 9.5 9.0 8.0 6.9 5.0 4.6 3.8 2.2 7.0

23.7 15.5 15.4 11.2 7.7 7.1 6.1 5.4 5.2 2.7 100.0

11.3 7.4 7.4 5.3 3.7 3.3 3.1 2.6 2.5 1.3 4.8

17.5 14.5 14.8 10.7 10.0 9.1 5.9 7.6 6.2 3.7 100.0

16.3 13.5 13.8 9.9 9.3 8.1 5.7 7.1 5.8 3.4 9.3

Note: Deciles based on per capita income by households

member with disability are concentrated in the lower deciles: deciles I to V have more than 10% each of the households with a member with disability, whereas deciles VI to X have less than 1%. In the second column we can see which percentage of the households of the each decile have a member with disability. Clearly, deciles I to V have a higher percentage than average of the total households (7%). It is noticeable that more than 10% of households of households of deciles I and II have a member with disability. This gures are much larger than for the rest of the deciles. This oers wide scope for social policy since at least 10% of poor households (those in deciles I and II) have a member with disability, and maybe they poor because of that. Social policies focused on disabilty could reduce 10% of poverty. For the case of Uruguay, third to sixth column presents the deciles for severe and all disability. Results are similar to the Chilean case for all disability, but for severe disability we observe a higher concentration of households in lower deciles. Once again, it is worth to remark that more than 13% of the households od deciles I, II, and III are households with a disabled meber. The concentration of households with a member with disability in the lower part of the income distribution can also bee seen in their location in Lorenz curve. For space reasons, those graphs are presented in Appendix A.

63

Simulation of Social Policies

This section is devoted to the analysis of some policy simulations in Chile and Uruguay. The departing point is the current situation in each country regarding lump sum subsidies for individuals with a disability. As reported in section 3.3.4 there is an assistant pension in Chile for individuals with disability called PASIS,25 which is a monthly lump sum subsidy. This subsidy is about 90% of the poverty line in 2003. In parallel, there is a similar subsidy in Uruguay, however it cannot be distinguished from other subsidies in the available survey, limitating our analysis for Uruguay. As mentioned above, the PASIS subsidy in Chile implies that in order to be able to receive it, the individuals must full a series of requirements. This implies that comparisons with survey data, where disability is self declared, could be misleading. In spite of these caveats, comparing allocation of PASIS subsidy in the Chilean surveys is a useful exercise. The survey reports that 145,962 individuals received a PASIS subsidy. However, according to the survey, only 99,229 have a disability. Moreover, 9,436 individuals who receive PASIS subsidy and have a disability are working, violating one of the requirements of the subsidy which is not to be working. This implies that the allocation of the PASIS subsidy could be improved signicantly. As a reference, the total amount of resources devoted to the PASIS subsidy is Ch$65,528 millions (US$92,7 millions) per year.26 An interesting point is to note that in Chile there are 371,423 individuals whose households are poor and have a member with a disability. The average gap between their per capita income and the poverty line is Ch$14,341 (US$20). Then, the total amount of resources required to bring those individuals out poverty accounts for Ch$19,344 millions (US$27.4 millions) per year.27
25

Although we call PASIS only the subsidy for individuals with disability, there are other subsidies

called PASIS as well. 26 This is 0.13% of GDP, or 0.61% of Public Expenditure, or 0.86% of Social Expenditure. 27 This is 0.04% of GDP, or 0.18% of Public Expenditure, or 0.25% of Social Expenditure.

64

The rest of this section explains the simulation exercises and analyses the eects of those policies in poverty rates and income distribution, as well as resporting the cost of the policies.

6.1

Policy Simulations Exercise

Since the information contained in the surveys is dierent for Chile and Uruguay, we carry out dierent policies for each country. In the case of Chile, four policies are evaluated. The rst one corresponds to increase the PASIS subsidy in 10% for all individuals who have a disability. The second one implies to allocate a lump sum subsidy equivalent to the PASIS subsidy to all those iindividuals who have a disability and do not receive a PASIS subsidy (this is a form of correctly allocate the PASIS). The third policy is the sum of the rst and second policy. The fourth policy implies the labour market inclusion of some individuals with disability. This policy is the same for Uruguay and will be explained in detail below. A fth policy simulation exercise that implies computing the amount of resources that could be saved by including all individuals receiving disability subsidy into the labour market is carried out for Chile in appendix B. In the case of Uruguay, two policies are evaluated. The rst one corresponds to a lump sum subsidy equivalent to the Chilean PASIS (this is, 90% of the urban poverty line) for those individuals with a disability. The second policy implies the labour market inclusion of some individuals with disability. The labour market inclusion of individuals with disability is made in two steps. First, only those with a large probability of participating in the labour market are made to work. For this purpose, a participation regression is run.28 Predicted participation probabilities are obtained for each individual. Then, those with a probability equal
28

We used a Probit model that corresponds to model (1) in Table 14, with explanatory vari-

ables experience, experience2 , years of education, dummy for gender, number of working people in household, number of children aged 15 or less, and a dummy for disability.

65

or larger than 0.4 are made to work. The second step is to allocate an hourly wage to each individual according to their characteristics. A wage equation is used to compute a predicted wage for each person.29 Finally, the average number of hours worked by those individuals with a disability who currently work is used for the number of hours worked by the new workers. Some important statistics for the labour market inclusion simulation policy are number of hours worked and average wage of individuals with and without disability. While the average worker in Chile works 181 hours per month, the average worker with a disability30 works 173 hours per month. In Uruguay, the average worker works 179 hours per month, and the average worker with a disability31 works 161 hours per month. There are 59,990 potential workers with a disability in Chile (with a threshold in predicted probability of participating larger than 0.4). Their predicted average wage is Ch$144,940, while the average worker earns Ch$228,598 and the average worker with a disability earns Ch$298,750. There are 16,208 potential workers with disability in Uruguay (with a threshold in predicted probability of participating larger than 0.4). Their predicted average wage is Ur$3,566, while the average worker earns Ur$7,350 and the average worker with disability earns Ur$4,791. The dierences in predicted wages come from the fact that the years of education of individuals with disability is signicantly smaller than that of individuals without any disability, and from the fact that individuals with disability work less hours per month.
29

The wage equation used to input earnings to those individuals with disability integrated into

the labour market corresponds to model (1) in Table 10, and it includes as explanatory variables experience, experience2 , years of education, dummy for gender, and a dummy for disability. 30 There are 86,600 worker with a disability, 1,6% of total workers 31 There are 23,961 worker with a disability, 2,6% of total workers

66

6.2

Policy Simulations in Chile

Table 23 presents the eects on poverty rates of dierent policies in Chile. The eect of policy (a) increasing the PASIS subsidy in 10% on poverty is hardly noticeable among individuals with disability. Poverty rate is reduced from 23.4% to 23.1%, and the prevalence of disability among poors reduces from 10.7% to 10.6%. This is not surprising for two reasons. First the individuals who receive PASIS subsidy and are poor corresponds only to 22% of the poor with disability. Second, the average poverty gap of individuals with disability is around three times the increase in the subsidy. The simulation exercise (b) allocating a PASIS subsidy to all individuals with a disability who are not currently receiving the subsidy has more interesting eects. Poverty rate of individuals with disability reduces to 16.9%, much closer to the country level poverty rate, 15.4%. Also, the prevalence of disability among poors reduces to 8.2%, signicantly closer to the average for the country, 7.0%. The combination of both policies (a) and (b) has eects rather similar to those of (b). Policy (c) Labor Market Inclusion of workers with disability has minor eects on poverty. Poverty rate is reduced from 23.4% to 21.7%, and the prevalence of disability among poor is reduced from 10.7% to 10.1% only. This policy is not particularly effective in reducing poverty for two reasons. First, workers with disability have much lower human capital than the average worker and also work a reduced number of hours, so that the salary they would receive is not particularly important. However, more important is the second reason, which is the fact that out of the 59,990 potential workers with a disability in Chile, only 13,018 are poor. This is, they account for only 11% of the poor with a disability.

Table 24 presents the cost of the above simulated policies related to the PASIS subsidy.32 We can observe that the amount of resources required for policy (a) and (b) corresponds to less than 3% of social expenditure. Since these policies also allow to reduce overall poverty from 15.4% to 14.6% by focusing resources to individuals with disability they appear to be even more attractive.
32

The labour market inclusion policy has no direct cost, hence it is not considered here.

67

Table 23: Simulation of Social Policies in Chile: Eects on Poverty Rates

Column Percentage Member of Household with a disability Without With Total Row Percentage Member of Household with a disability Without With Total

Non-Poor Poor Total

85.3 14.8 100

76.6 23.4 100

84.6 15.4 100

93.6 89.3 93.0

6.4 10.7 7.0

100 100 100

Policy: (a) Increase PASIS in 10% Non-Poor Poor Total 85.3 14.7 100 76.9 23.1 100 84.7 15.3 100 93.6 89.4 93.0 6.4 10.6 7.0 100 100 100

Policy: (b) Correctly Allocate PASIS Non-Poor Poor Total 85.6 14.4 100 83.1 16.9 100 85.4 14.6 100 93.2 91.8 93.0 6.8 8.2 7.0 100 100 100

Policy: (a) + (b) Non-Poor Poor Total 85.6 14.4 100 83.3 16.7 100 85.5 14.6 100 93.2 91.9 93.0 6.9 8.1 7.0 100 100 100

Policy: (c) Labor Market Inclusion of workers with disability Non-Poor Poor Total 85.4 14.6 100 78.3 21.7 100 84.9 15.1 100 93.5 89.9 93.0 6.5 10.1 7.0 100 100 100

68

Table 24: Simulation of Social Policies in Chile: Cost of Policies

Number of people Policy receiving benet Individual Cost Ch$ of 2003 US$ mill % of GDP Annual Total Cost % of Public Expend. % of Social Expend.

(a) Increase PASIS in 10% (b) Correctly Allocate PASIS (a) + (b)

99,229 459,796 559,025

3,741 37,412 31,435

6.3 292.0 298.3

0.01 0.41 0.41

0.04 1.91 1.95

0.06 2.70 2.76

Table 25 reports the eect of the dierent policies on income distribution. We can observe that the eects are only relevant for policy (b) and (a)+(b). The eect is mostly noticeable in the rst decile, where the concentration of individuals with disability reduces from 15.9% to 10.6% and 10.4% respectively. Also, the prevalence of disability in the rst decile is reduced from 11.2% to 7.4% and 7.3% respectively, signicantly closer to the average for the country of 7%.

69

Table 25: Simulation of Social Policies in Chile: Eects on Income Distribution

(a) Increase PASIS in 10% (b) Correctly Allocate PASIS (a) + (b) (c) Labor Market Inclusion of workers with disability % of Population w/ disability w/ disability w/ disability w/ disability w/ disability w/ disability % of Decile % of Population % of Decile % of Population % of Decile % of Population w/ disability % of Decile w/ disability

Income Distribution and Member of Household with Disability

% of Population

% of Decile

Deciles

w/ disability

w/ disability

I 10.2 9.5 9.0 8.0 6.9 5.0 4.6 3.8 2.2 7.0 100 7.0 100 7.0 3.1 2.2 3.4 2.4 5.4 3.8 5.9 4.2 5.9 3.4 100 6.5 4.6 7.1 5.0 7.1 7.2 5.1 8.2 5.8 8.3 9.9 6.9 10.9 7.6 11.0 11.4 8.0 12.6 8.9 12.7 12.8 9.0 13.6 9.6 13.5 13.6 9.6 13.6 9.5 13.7 9.6 9.5 8.9 7.7 5.8 5.0 4.2 2.4 7.0 14.4 10.1 14.1 9.9 14.0 9.9

15.9

11.2

15.7

11.0

10.6

7.4

10.4

7.3

14.5 13.9 12.9 12.6 11.9 10.1 7.3 7.7 5.8 3.2 100

10.2 9.8 9.1 8.8 8.4 7.1 5.2 5.4 4.1 2.3 7.0

II

14.5

III

13.5

IV

12.8

11.4

VI

9.8

VII

7.2

VIII

6.5

IX

5.4

3.1

Total

100

70

6.3

Policy Simulations in Uruguay

Table 26 presents the eects on poverty rates of dierent policies in Uruguay. As mentioned earlier, two policies are simulated for Uruguay: (a) Create a lump sum subsidy of 90% of Poverty Line, and (b) Labor Market Inclusion of workers with disability. Policy (a) has interesting eects in reducing poverty from 39% to 22.7% for individuals with a disability. Also, the prevalence of disability among poor is reduced from 15.2% to 9.9%, rather close to the country average, 9.7%. In parallel, policy (b) has minor eects on poverty. Poverty rate is reduced from to 36.7%, and the prevalence of disability among poor is reduced to 14.4% only. As in the Chilean case, this policy is not particularly eective in reducing poverty for two reasons. First, workers with disability have much lower human capital than the average worker and also work a reduced number of hours, so that the salary they would receive is not particularly important. However, more important is the second reason, which is the fact that out of the 16,208 potential workers with a disability in Uruguay, only 7,001 are poor. This is, they account for only 13% of the poor with a disability.

Table 26: Simulation of Social Policies in Uruguay: Eects on Poverty Rates

Column Percentage Member of Household with a disability Without With Total Row Percentage Member of Household with a disability Without With Total

Non-Poor Poor Total

76.6 23.4 100

61.0 39.0 100

75.1 24.9 100

92.1 84.9 90.3

7.9 15.2 9.7

100 100 100

Policy: (a) Create lump sum subsidy of 90% of Poverty Line Non-Poor Poor Total 77.8 22.2 100 77.3 22.7 100 77.8 22.2 100 90.4 90.1 90.3 9.6 9.9 9.7 100 100 100

Policy: (b) Labor Market Inclusion of workers with disability Non-Poor Poor Total 76.7 23.3 100 63.4 36.7 100 75.4 24.6 100 91.9 85.6 90.3 8.1 14.4 9.7 100 100 100

71

Table 27 presents the cost of the above simulated policy related to the lump sum subsidy.33 We can observe that the amount of resources required for policy that policy corresponds to 10% of social expenditure. Since these policies also allow to reduce overall poverty from 24.9% to 22.2% by focusing resources to individuals with disability it appears to be attractive for the policy maker.

Table 27: Simulation of Social Policies in Uruguay: Cost of Policies

Number of people Policy receiving benet Individual Cost Ur$ of 2003 US$ mill % of GDP Annual Total Cost % of Public Expend. % of Social Expend.

Create lump sum subsisdy of 90% of Poverty Line 181,504 3,000 232 2.07 8.39 9.91

Table 28 reports the eect of the dierent policies on income distribution for Uruguay. The eect of the creation of a lump sum subsidy on income distribution is noticeable, particularly in the rst and second deciles. The rst decile reduces its concentration of individual with disability from 18% to 7.6%, and second does from 14.3% to 11.7%. The percentage of individuals of the rst decile with disability drops from 17.4% to 7.4%, while in the second decile it drops from 13.9% to 11.3%. Finally, the eect of the labor market inclusion of workers with disability has lower eect on income distribution compared to the previous policy. There is a signicant eect only in the rst decile, where the concentration of individuals with disability drops from 18% to 16.4%, and the prevalence of disability drops from 17.4% to 15.9%.

33

The labour market inclusion policy has no direct cost, hence it is not considered here.

72

Table 28: Simulation of Social Policies in Uruguay: Eects on Income Distribution

Income Distribution and Member of Household with Disability Create lump sum subsidy of 90% of Poverty Line % of Population Deciles w/ disability % of Decile w/ disability % of Population w/ disability % of Decile w/ disability Labor Market Inclusion of workers with disability % of Population w/ disability % of Decile w/ disability

I II III IV V VI VII VIII IX X Total

18.0 14.3 14.6 10.7 10.1 9.1 5.9 7.5 6.2 3.6 100

17.4 13.9 14.2 10.4 9.7 8.5 5.9 7.3 6.0 3.5 9.7

7.6 11.7 13.3 14.0 11.9 10.8 9.7 9.0 7.5 4.5 100

7.4 11.3 12.9 13.6 11.5 10.4 9.4 8.8 7.3 4.4 9.7

16.4 14.3 13.3 11.8 10.3 9.2 6.8 7.3 6.8 3.8 100

15.9 13.9 12.9 11.4 9.9 8.8 6.7 7.1 6.6 3.7 9.7

Conclusions

This paper contributes with evidence on the opportunities of individuals with disabilities in the labor market and the eects on poverty and income distribution. By using information of two national representative household surveys for Chile and Uruguay in 2003, the paper provides pioneering evidence on the impact of the economic opportunities of individuals with disabilities in LDCs. The evidence presented in this paper provides some ground to understand the opportunities in access to education, participation, earnings and unemployment of those individuals with disabilities or living in a household with members with disabilities. The evidence shows that individuals with disabilities or households with a member with disabilities experience signicant diculties in the labor market. On the one hand, the results show that in both countries individuals with disabilities are less capable to accumulate human capital from formal education. Thus, the evidence indicates that the school system is not providing equal opportunities to all members in the society. This result is particularly important considering that Chile and Uruguay are among the wealthiest countries in LA. Therefore, we would expect to observe even more diculties for individuals with disabilities in the rest of the region. In addition, the lower access to formal education means less productivity and wages. When a sample of working people is considered, the previous results remain

73

stable. In addition, the lag in formal education is also observed for other family members. However, the evidence also indicates that younger cohort tend to be better o in the access to formal education. One potential explanation is that new resources have been provided to improve the access to education to individuals with disabilities. Disability also explains lower labour market participation rates for both males and females. Also, a negative correlation is observed when there is a member with disability in the household. An interesting result is that disability has a higher impact for males than for females. This result may be interpreted as females taking care of members with disabilities in the household and with a lower participation rate. In other words, the lower female participation rate is already indicating a broad set of restrictions (children, cultural factors, caring activities, etc,). Finally, the presence of an individual with disabilities in the household reduces participation but only marginally. One interesting result is the correlation between disability and the participation in labor market of other family members. Although the eect is negative, the estimates are not signicantly dierent from zero. This eect may be explained by the fact that family labor decisions may be correlated with disabilities for any family member. In other words, the observed market outcome is endogenous to family choices. Individuals with disabilities not only exhibit lower educational attendance, but also lower return to schooling and a negative eect associated to disability. For instance, while the average return to schooling is about 14% in Chile, the corresponding return for an individual with disability who is participating in the labour market (i.e. with more human capital than other individuals with disability - those who do not participate) is near to 9%. In addition, controlling for human capital, an individual with disabilities receives a payment of 9% less than a worker without disabilities (discrimination eect). Adding up the eects, a worker with disabilities in both countries obtains approximately 20% less salary in the labor market. By using the previous estimates, through dierent simulation strategies, we evaluated dierent policy interventions and the eects on poverty and inequality for individuals with disabilities. In Chile a subsidy targeted to individuals with disabilities (PASIS)

74

has been allocated since 1975. This subsidy in 2003 is equivalent to 90% of the poverty line. In Uruguay there is no such type of subsidy. We modeled a 10% increase in the subsidy in Chile and its eects on poverty and income distribution. A similar analysis was made for Uruguay as if such subsidy already existed. The evidence indicates that increasing the subsidy in 10% is not eective to reduce poverty in Chile, which is mainly explained because the subsidy is too small to produce a signicant change on poverty rates. On the other hand, in Uruguay, if such subsidy were implemented a signicant change in poverty would be observed. However, in Chile this subsidy faces signicant targeting problems. We observe that only 70% of those who receive PASIS subsidy actually have a disability, according to CASEN. When a correction of this misallocation is simulated, in our model we observe a signicant reduction in poverty in this group, achieving similar poverty rates between household with and without members with disability. In Chile, poverty rates are reduced from 23% to 16%, while in Uruguay poverty is alleviated from 39% to 22%. However, while in Chile the changes in the subsidy represent 3% of public social expenditures, in Uruguay this gure is near to 10%. Another policy evaluated in this paper is labour market inclusion of workers with disability. Using the previous estimates on participation decision and wage equations we simulate the changes in earnings, poverty and income distribution. If policy makers were able to incorporate into the labour market a group of people with disabilities two main results would be observed. First, only a small fraction of individuals with disabilities would be possible to be incorporated into the labor market. Second, conditional on this participation, they would receive low wages mainly explained by low accumulation of human capital(formal education). Adding up such eects, the impact on poverty in both countries is about two percentage points. In addition, the eects on income distribution are not signicant. Thus, the evidence indicates that labour market inclusion policies should be accompanied by training activities oriented to increase human capital and productivity. Only in such way a positive eect on welfare would be observed.

75

Bibliography
Disability and Poverty Reduction: Including Disability in the Development Agenda. Concept Paper, BID. Washington D.C., 2004. Primer Estudio Nacional de la Discapacidad en Chile: Resumen de Resultados. FONADIS. Santiago, 2005. Informe PMG Discapacidad y G enero. FONADIS. Santiago, 2005. Encuesta Nacional de Personas con Discapacidad. Instituto Nacional de Estad stica, Rep ublica Oriental del Uruguay. Montevideo, 2004. Montero, Garc es and Agurto (2006), Discriminaci on salarial por condici on etnica en Chile: 1996-2003, Mimeo. Ley 19.284 de Integraci on Social de las Personas con Discapacidad. Gobierno de Chile, 1994. Programa de acci on Mundial para las Personas con Discapacidad. ONU. 1982. Using and Asset-Based Approach to Identify Drivers of Sustainable Rural Growth and Poverty Reduction in Central America: A conceptual Framework, Paul B. Siegel, WorldBank Working Paper 3475, 2005. Socio-economic Disadvantage and Prevalence of Disability. Social Policy Research Centre, University of New South Wales, Australia, 2000. Women 2000: gender equality, development and peace for the twenty-rst century UN general Assembly, Beijing, 2000. Towards a Common Language for Functioning, Disability and Health - ICF. WHO, Geneva, 2002.

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8.1

Internet Links

www.mineduc.cl www.fonadis.cl www.minsal.cl www.who.int/en/ www.paho.org www.ilo.org www.un.org www.ine.gub.uy

77

Appendix A

Disability and Income Distribution

Figure 2: Disability and Income Distribution: Chile (all disability)

(Chile: All Disability, Deciles of per capita income)

18 16 14 12 10 % 8 6 4 2 0 I II III IV V Deciles VI VII VIII IX X

% of Households w/ member w/disability

% of Decile w/disability

78

Figure 3: Disability and Income Distribution: Uruguay (severe disability)

(Uruguay: Severe Disability, Deciles of per capita income)

25

20

15 % 10 5 0 I II III IV V VI Deciles VII VIII IX X

% of Households w/ member w/disability

% of Decile w/disability

79

Figure 4: Disability and Income Distribution: Uruguay (all disability)

(Uruguay: All Disability, Deciles of per capita income)

20 18 16 14 12 % 10 8 6 4 2 0 I II III IV V Deciles VI VII VIII IX X

% of Households w/ member w/disability

% of Decile w/disability

80

Appendix B

Policy Simulation

A simple policy simulation exercise is to compute the amount of resources that could be saved by the government by inserting individuals with disability into de labour market. Table 29 shows that, according to CASEN 2003, there is a total of 146,482 individuals who receive the PASIS subsidy in Chile. That implies a monthly amount of US$8.8 millions (US$105,000 per year). Then, if all those individuals were included into the labor market the government would save around a US$100 millions per year according to CASEN 2003. If the number of individuals included into the labour market were reduced to those currently unemployed the gure would reduce to around US$93 millions.

Table 29: Simulation of Monthly Resources Allocated to PASIS Subsidy: Chile

With Disability Employed Inactive and Unemployed # of PASIS Disability Amount # of PASIS Mental Disability Amount Total PASIS Total Amount Source: CASEN 2003. Note: The value of the PASIS subsidy is Ch$37,412 = US$60 (US$1 = Ch$625 November 2003). 7,546 $ 451,698 2,182 $ 130,613 9,728 $ 582,310 61,691 $ 3,692,774 28,162 $ 1,685,755 89,853 $ 5,378,529 69,237 $ 4,144,471 30,344 $ 1,816,368 99,581 $ 5,960,839 6,382 $ 382,021 578 $ 34,599 6,960 $ 416,620 Sub Total Without Disability Employed Inactive and Unemployed 37,262 $ 2,230,474 2,679 $ 160,363 39,941 $ 2,390,836 43,644 $ 2,612,495 3,257 $ 194,961 46,901 $ 2,807,456 112,881 $ 6,756,966 33,601 $ 2,011,329 146,482 $ 8,768,295 Sub Total Total

81