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Working Paper, No. 2023-11, March 2023 Crossref
Employment and Welfare Effects of the Quota for Disabled Workers in Brazil

I study the effect of a quota for disabled workers on the labor market and on welfare. Using a task-based model, I show that the effect of a quota will depend on the productivity of disabled workers and their labor supply elasticity. I estimate the productivity of disabled workers using variation from inspections of the quota. I find that the quota increased the hiring of disabled workers, but it reduced wages and employment of non-disabled workers, suggesting that the quota reduced firms’ productivity. I estimate the labor supply elasticity of disabled workers using heterogeneous exposure across regions. Using the model calibrated to the empirical estimates, I find that the quota for disabled workers decreased welfare by 0.33% and forced the government to increase marginal taxes. However, alternatively, a subsidy for disabled workers could increase welfare.

Working papers are not edited, and all opinions and errors are the responsibility of the author(s). The views expressed do not necessarily reflect the views of the Federal Reserve Bank of Chicago or the Federal Reserve System.

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