Disability and labor market outcomes in Sweden - Controlling for skill

Abstract: In this thesis, employment and earnings differentials between visually or hearing-impaired and non-disabled Swedish workers are analyzed. The thesis investigates whether there are any differences and if so, how large, in the earnings and the employment probabilities of the visually or hearing-impaired and the non-impaired on the Swedish labor market. Due to the detailed measures of visual acuity and hearing capacity provided by the data, a great degree of differentiation between different degrees of impairment is made. Acknowledging the possibility of investments in schooling being affected by actual or perceived labor market discrimination, a cognitive test score is used as an alternative measure of skill that is likely to be exogenous. A pooled sample is used to estimate differences in employment probability and earnings between individuals with various degrees of impairment, using the test score as the main explanatory variable. The results indicate that the degree of impairment is negatively related to both employment probability and earnings for both groups, although the differentials are small in most cases. Productivity differentials are likely to account for the main part of the employment and earnings gaps, while discrimination does not seem to have a substantial impact.