socio economic impact of disability in chile and uruguay

7/27/2019 Socio Economic Impact of Disability in Chile and Uruguay

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Socio-Economic Impact of Disability in

Latin America: Chile and Uruguay

Dante Contreras G. Jaime Ruiz-Tagle V.

Paz Garces Irene Azocar

July 21, 2006

Departamento de Economa

Universidad de Chile

Department of Economics, Universidad de Chile. e-mail: [email protected] .Department of Economics, Universidad de Chile. e-mail: [email protected] of Planning, Gobierno de Chile, e-mail: [email protected]. e-mail: [email protected].
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Contents

List of Figures 3

List of Tables 3

1 Introduction 5

2 Data description 7

2.1 Chile: CASEN 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

2.2 Uruguay: ECH 2003-2004 . . . . . . . . . . . . . . . . . . . . . . . . 9

2.3 Descriptive Statistic . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3 Disability and Society 17

3.1 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

3.2 Relational Models between Disability and Socio-economic Disadvantages 22

3.3 Disability in Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

3.3.1 Education and Disability in Chile . . . . . . . . . . . . . . . . 25

3.3.2 Labour Integration and Disability in Chile . . . . . . . . . . . 25

3.3.3 Gender and Disability in Chile . . . . . . . . . . . . . . . . . . 26

3.3.4 Assistance Pension for Disability . . . . . . . . . . . . . . . . 26

3.3.5 First National Study on Disability in Chile . . . . . . . . . . . 27

3.4 Disability in Uruguay . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

3.4.1 Uruguays First National Survey on People with Disability . . 31

4 Labour Market and Disability 33

4.1 Effects of Disability on Education . . . . . . . . . . . . . . . . . . . . 34

4.2 Wages, participation, return to education and disability . . . . . . . . 37

4.2.1 Econometric Models . . . . . . . . . . . . . . . . . . . . . . . 39

4.3 Earnings and returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

4.4 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

4.5 Unemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

5 Poverty and Income Distribution 57

5.1 Poverty Incidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

5.2 Probability of being Poor . . . . . . . . . . . . . . . . . . . . . . . . . 58

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5.3 Income Distribution and Disability . . . . . . . . . . . . . . . . . . . 61

6 Simulation of Social Policies 64

6.1 Policy Simulations Exercise . . . . . . . . . . . . . . . . . . . . . . . 65

6.2 Policy Simulations in Chile . . . . . . . . . . . . . . . . . . . . . . . . 676.3 Policy Simulations in Uruguay . . . . . . . . . . . . . . . . . . . . . . 71

7 Conclusions 73

8 Bibliography 76

8.1 Internet Links . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Appendices 78

A Disability and Income Distribution 78

B Policy Simulation 81

List of Figures

1 Representation of the model of disability of the ICF . . . . . . . . . . 20

2 Disability and Income Distribution: Chile (all disability) . . . . . . . 78

3 Disability and Income Distribution: Uruguay (severe disability) . . . 79

4 Disability and Income Distribution: Uruguay (all disability) . . . . . 80

List of Tables

1 Incidence of Disability by Age: Chile and Uruguay . . . . . . . . . . . 12

2 Incidence of Disability by Gender: Chile and Uruguay . . . . . . . . . 14

3 Incidence of Disability by Ethnic origin: Chile . . . . . . . . . . . . . 15

4 Incidence of Disability by Geographic Zone: Chile and Uruguay . . . 16

5 Education of workers: Chile and Uruguay . . . . . . . . . . . . . . . . 35

6 Education Lag: Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

7 Education Lag: Uruguay . . . . . . . . . . . . . . . . . . . . . . . . . 37

8 Chile: Labour Market Participation . . . . . . . . . . . . . . . . . . . 39

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9 Uruguay: Labour Market Participation . . . . . . . . . . . . . . . . . 40

10 Chile: OLS Regressions of Hourly Wage . . . . . . . . . . . . . . . . 43

11 Returns to Education: Chile . . . . . . . . . . . . . . . . . . . . . . . 45

12 Uruguay: OLS Regressions of Hourly Wage . . . . . . . . . . . . . . . 46

13 Returns to Education: Uruguay . . . . . . . . . . . . . . . . . . . . . 48

14 Chile: Probit Regressions of Participation in Labour Force . . . . . . 50

15 Uruguay: Probit Regressions of Participation in Labour Force . . . . 52

16 Unemployment Rates: Chile and Uruguay . . . . . . . . . . . . . . . 54

17 Unemployment Probit Regressions: Chile . . . . . . . . . . . . . . . . 55

18 Unemployment Probit Regressions: Uruguay . . . . . . . . . . . . . . 56

19 Poverty Rates: Chile and Uruguay . . . . . . . . . . . . . . . . . . . 59

20 Probit Regressions of Probability of Being Poor: Chile . . . . . . . . 61

21 Probit Regressions of Probability of Being Poor: Uruguay . . . . . . . 62

22 Deciles of Income Distribution and Disability: Chile and Uruguay . . 63

23 Simulation of Social Policies in Chile: Effects on Poverty Rates . . . . 68

24 Simulation of Social Policies in Chile: Cost of Policies . . . . . . . . . 69

25 Simulation of Social Policies in Chile: Effects on Income Distribution 70

26 Simulation of Social Policies in Uruguay: Effects on Poverty Rates . . 71

27 Simulation of Social Policies in Uruguay: Cost of Policies . . . . . . . 72

28 Simulation of Social Policies in Uruguay: Effects on Income Distribution 73

29 Simulation of Monthly Resources Allocated to PASIS Subsidy: Chile 81

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1 Introduction

The analysis of economic opportunities of people with disabilities and the social inclu-

sive 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 societyindicates 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 ca-

pacity for earning money. In addition, disability of a member of the family could

affect the job opportunities of other family members due to caring activities. Second,

a similar pattern could explain a lower human capital accumulation. Finally, socio-

economic 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 different attitude towards risky situations and a higher prob-

ability of participating in riskier occupations. This effect 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 effects 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 indi-

viduals with disabilities (or living in a household with members with disabilities) have.

The opportunities in the labor market that individuals face may have important

effects on poverty and income distribution. Given that poverty is measured by com-

paring per capita household income with a poverty line, by using the previous esti-

mates on labor market outcomes we examine through microsimulations the effect of

different polices oriented to individuals with disabilities and their effect on poverty

and inequality.

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The evidence indicates that individuals with disabilities have a significant lower ac-

cess 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 effects are not significant 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, significant and small impact on wel-

fare. This may be explained by the fact that individuals with disabilities experience

difficulties to accumulate formal human capital, which explain that those participat-

ing in the market are not able to generate enough earnings to alleviate poverty or

increase welfare.

Finally, we simulate the effects of subsidy to individuals with disabilities in Uruguay

equivalent to 90% of the poverty line (as PASIS is in Chile). If such subsidy were im-

plemented 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 significant 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 expen-

ditures.

The rest of this paper is organized into six sections. Section 2 provides a briefdescription the data used in this paper. Section 3 discusses disability and society,

explaining the complexity of the disability problem. Section 4 analyses labour mar-

ket performance of individuals with disability. Section 5 reviews poverty incidence

among individuals with disability and their respective households, and income dis-

tribution of those households compared to the overall population. Section 6 presents

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

2 Data description

Information on disability is scarce in Latin America. Only recently some efforts 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 car-

ried 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 briefly 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 and2.2, respectively.

2.1 Chile: CASEN 2003

The National Survey of Socio economic Characterization (Encuesta Nacional de Car-

acterizacion Socioeconomica - CASEN-) was first applied in Chile on 1985 and it has

been applied periodically since then. The last version of CASEN was reported on

1There 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.

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2003.

The main objectives of Casen 2 are, in the first place, to know the situation of house-

holds and population, specially of those living in poverty and of those groups defined

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 in-

dividuals. 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 differ from other sources, such

as the data from the Disability and Preventive Medicine Commission (COMPIN),

where every deficiency has to be verified by a medical opinion. Evidently, it is im-

possible to compare the figures reported for disability using such different methods.

The question used in CASEN is:

Is there any member of the household that presents one or more of these deficien-

cies...? (Mention max. three per individual)

1. Hearing Deficiency

2. Talking Deficiency

3. Seeing Deficiency

4. Mental Deficiency

5. Physical Deficiency

6. Psychiatric Deficiency

2Volumen 1: Pobreza, Distribucion del Ingreso e Impacto Distributivo del Gasto Social. Serie

CASEN 2003. Ministerio de Planificacion y Cooperacion, Gobierno de Chile. Agosto, 2004

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7. None

In this survey, Person with Deficiency is every person who has lost or has a per-

manent damage in any organ related with mental function (understanding, learning,etc.), sensory function (seeing, hearing, etc.) or anatomic function (walking, manip-

ulating objects, etc.). The Deficiency might be total or partial and congenital or

acquired.

The presence of deficiency is the main handicap that defines a disability condition in

a person. For the purpose of the analysis in this paper, the relevant definition of the

disability concept,that relates it with the deficiency concept, is the one used by the

National Fund for Disability (FONADIS), in the First National Study on Disabilityin Chile:3

Disability is a generic term that includes deficiencies 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 Contnua de Hogares - ECH) was es-

tablished in 1968 and is run almost permanently since then by the National Statitic

Office (Instituto Nacional de Estadsticas). This survey is applied monthly and its

main objective is to collect information on socio-demographic and economic charac-

teristics of the population, particularly education and income, in places with 5,000

3First National Study on Disability . National Fund for Disability (FONADIS). Chile, 2004. For

further information see section 3.3.5.

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and more inhabitants of the whole country. The ECH allows to add module of addi-

tional 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 in-

dividuals were included in the sample in a an homogeneous manner during the period.

As a reference framework the International Classification of Functioning, Disabil-

ity and Health (ICF) of the World Health Organization (WHO) was implemented.

We review the definitions 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

difficult, has mental limitations that makes learning difficult, other permanent limi-

tation?

1. Is blind, deaf, etc.

2. With limitations

3. Without this disability

Based on the questionnaire, we consider two definitions 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.

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2.3 Descriptive Statistic

Since the data in CASEN 2003 does not make a distinction between severe or to-

tal disability, it is assumed that this survey reports all kinds of disabilities together.

Therefore, the comparable figures correspond to the Chilean data reported in CASEN

2003 and the all disability definition used for Uruguay. In this section, descriptive

data is presented for both countries, using the all disability definition for Chile and

the all disability and severe disability definitions for Uruguay.

Table 1 shows the incidence of disability by age for Chile and Uruguay. In Chile,using the definition 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 specifically 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 definitions. 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 figure 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 definition of all disability, Uruguay presents 7.6% of individuals

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Table 1: Incidence of Disability by Age: Chile and UruguayDisability by Age (%)

Disability of Individual

Without With

CHILE (all disability)

0 to 14 98.2 1.8

15 to 18 97.7 2.3

19 to 24 98.1 1.9

25 to 64 96.6 3.4

65 and more 85.9 14.1

Total 96.4 3.6

URUGUAY (severe disability)

0 to 14 97.8 2.2

15 to 18 97.5 2.5

19 to 24 98.1 1.9

25 to 64 97.9 2.1

65 and more 95.3 4.7

Total 97.5 2.5

URUGUAY (all disability)

0 to 14 96.9 3.1

15 to 18 96.8 3.2

19 to 24 97.1 2.9

25 to 64 94.4 5.6

65 and more 75.5 24.5

Total 92.4 7.6

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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 figures, it is possible to extract that all disability is

much more a problem of ageing than severe disabilty, whose pattern we also find for

Chile.

Table 2 presents statistics of disability separated by gender. The first 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 house-

holds 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 different for Uruguay. Fist, the percentage of females in-

dividuals 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 exam-

ple 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-

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Table 2: Incidence of Disability by Gender: Chile and UruguayDisability by Gender (%)

Disability of Individual Disability of Household Member

Without With Without With


Males 96.2 3.8 93.3 6.7

Females 96.6 3.4 92.0 8.0

Total 96.4 3.6 93.0 7.0


Males 97.2 2.8 95.3 4.8

Females 97.7 2.3 95.1 4.9

Total 97.5 2.5 95.2 4.8


Males 93.0 7.0 90.0 10.0

Females 91.8 8.2 92.2 7.8

Total 92.4 7.6 90.7 9.3

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

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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: ChileDisability by Ethnic Origin (%)

Disability of Individual

Without With


From Ethnic minority 96.4 3.5

Not from Ethnic minority 96.5 3.6

Total 96.4 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 figures 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

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Table 4: Incidence of Disability by Geographic Zone: Chile and UruguayDisability by Geographic Zone (%)

Disability of Individual Disability of Household Member

Without With Without With


Rural 95.8 4.2 91.9 8.1

Urban 96.5 3.5 93.1 6.9

Total 96.4 3.6 93.0 7.0


Montevideo 97.6 2.4 95.7 4.3

Rest of the country 97.3 2.7 94.7 5.3

Total 97.5 2.5 95.2 4.8


Montevideo 92.3 7.7 91.0 9.0

Rest of the country 92.5 7.5 90.3 9.7

Total 92.4 7.6 90.7 9.3

Note: Disability of Household Member counts percentage of households.

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

Montevideo.

3 Disability and Society

In this section we will mention the main theories regarding disability, the most im-

portant 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 be-

yond the scope of this study.

3.1 DisabilityThe 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

4For 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.

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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 re-

garding disabled people and their rights.

1948: Universal Declaration of Human Rights 1980: The World Health Organiza-

tion 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 orga-

nization has also promote technical cooperation between countries. The Com-

munity 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 topromote 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 fulfilment

of the International Convention of Childrens Rights, developing strategies to

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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, Scientific and Cultural Organization

(UNESCO) Has taken care of Special Education, disigning policies and laws,training teachers an giving financial 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 Dis-

ability and Development, was created on 2000. This office concentrates on peo-

ple with disabilities and the exclusion conditions they have to face, especially

in developing countries.

Inter-American Development Bank (IADB) The work of the Bank re-

garding disability can be classified in two areas: (a) Urban Development, e.g.,

access to public transportation. (b) Social Development, e.g., poverty and ex-

clusion 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 statis-

tical and legal framework studies, among others.

All the efforts 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, politi-

cal, 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 definitions around this subject is the one in-

cluded in the International Classification of Functioning, Disability and Health (ICF)

of the World Health Organization (WHO).

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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 definition disability an functioning are viewed as outcomes of interactions

between health conditions and contextual factors 6.

Among contextual factors we find 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 dys-

functioning at one or more of these levels.

The formal definitions of the components of IFC are the following 7:

5Towards a Common Language for Functioning, Disability and Health - ICF. WHO, Geneva,

2002.6Id. 17Id. 1

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Body Functions are physiological functions of body systems (including psy-

chological 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 significant

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 difficulties an individual may have in executing ac-

tivities.

Participation Restrictions are problems an individual may experience in

involvement in life situations.

Environmental Factors make up the physical, social and attitudinal environ-

ment in which people live and conduct their lives.

Disability theories define the concept as a social product and not as an individual

problem. Under this definition Disability is determined by the relationship between a

persons mental or physical deficiency and his or her social, political, economical and

cultural enviroment.

Another way to analyze the same problem is by using the human functioning con-

cept. The functioning levels vary enormously within society, therefore, this should

be considered by the public policy designers. When someone with different level of

functioning does not have access to medical attention or treatment, education or a

job, etc., then a disability condition is generated.

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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 organiza-

tions.

Involve other institutions in each country and inform them about the exclu-

sion 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 socioeco-

nomic group:

In the first place, we can observe a causal relationship between disability and so-

cioeconomic disadvantages. In this case disability would diminish peoples capacity

for earning money. In addition to this, disability of a member of the family would

affect the possibility of having a job of other members of the family because most of

8Socio-economic Disadvantage and Prevalence of Disability. Social Policy Research Centre, Uni-

versity of South Wales, Australia. 2000

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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 influence 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 different 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 difficult 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 con-

cept. Also, the concern for disabled people has changed, together with the idea of the

proper inclusion of these people in society.

In a first period, the responsibility for demanding more integration oportunities and

social participation for the disabled was entirely on the hands of civil society orga-

nizations 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. Nev-

ertheless, the solutions given by these organizations did not look upon the fact that

disabled people have an important role in understanding and overcoming their prob-

lems.

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

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as, the Public Health Department, the Medical Association and the National Com-

mission 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 deficiencies (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

deficiencies.

In addition, the Law defines these three concepts:

Educational Disability: The person, because of his/her particular charac-

teristics, 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 deficiencies- 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 fa-

miliar situation and same geographical location).

This law utilized the same conceptual framework for disability as the National Survey

of Socio Economic Characterization (CASEN). The deficiencies that legally define

a disability condition for a person, are specifically included in the question of the

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survey regarding disability. The disability definition in both the law and the survey,

is particularly relevant for the rest of this study in the sense that it defines the type

of disadvantages that an individual with disability can face and how it can affect his

well-being.

3.3.1 Education and Disability in Chile

The universal right to education, with independence of socioeconomic situation, eth-

nic, sex and disability condition, has been ratified by a number of international agree-

ments 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 (NecesidadEducativa 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 financing projects and scholarships.

However, there is still a need for Special Education for the cases that do not fitin Normal Education, in order to respect the right of every citizen to be given in-

struction.

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 par-

ticipation 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.

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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 de-

velopment, 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 beneficiary.

3.3.3 Gender and Disability in Chile

Although Chile hasnt got a special normative regarding women and disability, ourcountry has been part of the world discussion of this issue and has signed the inter-

national 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 workbecause of illness, disability, old age, maternity, etc.

3.3.4 Assistance Pension for Disability

The Chilean law 10 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

affiliated 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-first century UN general

Assembley, Beijing, 2000.10DFL 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.

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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 re-

ceived 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 certificate 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 define disability, so it depends on

the criterion of each commission to what extent a deficiency 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 different types and degrees;

and the extent in which this condition affects individuals in various aspects of their

lives 13.

The conceptual definition of the study, as well as the instrument to compile infor-

11This 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.12First Nacional Study on Disability. Nacional Fund for Disability (FONADIS). Chile, 2004.13Id. 6

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mation is based in the International Classification 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 an-

swers that individuals gave with regard to the presence of certain deficits 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 definition

of Disability used here for the first time:

Disability is a generic term that includes deficiencies of body functions and/or struc-

tures, 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 confidence. The survey consisted of a probabilistic three-stage sample design,

which enabled representation of the Chilean population. It was stratified 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.

14Id. 615This study is an excellent effort 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

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Disability and deficiency 8,2% of the national population with a disability has

an associated deficiency.

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 outof 2 individuals with disability is between 30 and 64 years old.

Disability according to age and gender Until age 15, disability is more predomi-

nant in males than in females. In the 15 to 40 age group they level off 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 affected the family economicsituation; 50% state that it has affected 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 difference of 27,5% of the coun-

trys total population that currently studies. 10% do not have even one year of

education approved; 42% have not been able to finish elementary school; only

13% have finished high school and a scarce 5,7% have had access to college or

to an institute of professional technical education. Less than 1% has finished

a career in a center of technical education. There is a high percentage of peo-

ple with disability (94%) between 6 and 14 years that are currently studying.

However, the percentual decreases significantly 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

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in the last year. 6,5% of the individuals with disability have received rehabili-

tation 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 suffers a permanent or long

term mental or physical functional alteration that, considering age and social condi-

tions, 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, so-cial, 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.

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Ministry of Public Health and counts with the participation of a number of govern-

mental 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 dis-

ability, in certain circumstances.

3.4.1 Uruguays First National Survey on People with Disability

17

On August 2003, the Honorary National Commission for Disability and the Uruguays

National Institute of Statistics (Instituto Nacional de Estadsticas - INE-), design the

First National Survey on People with Disability that was to be included in the House-

holds Survey.

The objective of the survey was to obtain information about physically and men-

tally disabled population, in order to measure the relative weight of the different

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 definitions of disability and related terms used in this investigation correspond

to the ones in the International Classification of Functioning, Disability and Health(ICF) which was promulgated by the World Health Organization and the Pan Amer-

ican Health Organization (PAHO-WHO, 2001).

17 Encuesta Nacional de Personas con Discapacidad. Instituto Nacional de Estadstica, Republica

Oriental del Uruguay. Montevideo, 2004.

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The survey was applied between September 2003 and August 2004, to 18,300 house-

holds 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 off

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 partici-

pates 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 en-

gaged 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 popu-

lation 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.

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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 in-formation 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.

4 Labour Market and Disability

Labour market performance of individuals with disabilities may be affected through

several channels, including wages, participation, job opportunities and unemploy-

ment. This section examines how people with disabilities perform in the labour

market.

On one hand, an individual with disability may face difficulties 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 firms

not having physical resources, space and environment appropriate for them. On the

other hand, for those individuals that are actually working, they may face discrim-

ination 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.

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As it was mentioned in section 2.3, for the case of Uruguay we have two definitions

of disabilities: severe and mild. The definitions come from the survey, where mild

disability corresponds to difficulties 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 definition.

4.1 Effects of Disability on Education

As it was discussed above, individuals with some physical or psychological limitationcould face significant obstacles in the access to formal education. This is particularly

important because people facing less access to human capital will experience less op-

portunities in the labour market. This can be viewed as a long-run effect 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 difference is equivalent to two years of formal education.

Another way to illustrate the effects 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 differences across the income distribution. Table 7 resumes the

same information for Uruguay where the two definitions of disability are used.

In the top panel of Table 6 we present the years of education of people aged 18-

21 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

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Table 5: Education of workers: Chile and UruguayAverage years of Education of workers

Male Female Total


with disability 8,6 9,1 8,8without disability 10,8 11,6 11,1

Total 10,8 11,6 11,1


with disability 6,9 8,5 7,4

without disability 9,2 10,3 9,7

Total 9,2 10,3 9,7


with disability 7,3 8,6 7,9

without disability 9,2 10,3 9,7

Total 9,2 10,3 9,7

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

when a family member is disable. Finally, the average years of schooling do not vary

significantly 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 suffers a disability this seems to have almost no effects on the educa-

tion level of the other family members. Third, there is no significant differences across

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Table 6: Education Lag: Chile

Education-Cicle Lag: CHILE Age 18 to 21 (Secondary Education)

Quintile Without With From Hh. without From Hh. with

Disability Disability member w/disab. member w/disab.

I 10,7 6,4 10,6 10,2

II 11,2 6,9 11,2 10,8

III 11,7 8,8 11,7 11,1

IV 12,2 8,0 12,1 12,1

V 12,8 7,3 12,8 12,2

Total 11,7 7,5 11,7 11,0

Note: Quintiles based on per capita income by individuals

Education-Cicle Lag: CHILE Age 22 to 30 (Tertiary Education)

Quintile Without With From Hh. without From Hh. withDisability Disability member w/disab. member w/disab.

I 9,7 5,1 9,6 9,2

II 10,7 5,6 10,6 10,4

III 11,7 6,2 11,6 11,6

IV 12,9 6,5 12,8 12,9

V 14,8 10,5 14,8 14,0

Total 12,2 6,4 12,1 11,3


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the income quintiles. The most important result in Uruguay is given by the disability

definitions. As it is expected, the educational gap when the disability is severe is

much higher than under the all disability definition. This is important because by

examining the Uruguayan case we can realize how important is to move on to a more

comprehensive definition in the household data bases. To improve public policies a

convincing definition must be incorporated in surveys.

Table 7: Education Lag: Uruguay

Education-Cicle Lag: Age 18 to 21 (Secondary Education)

URUGUAY (severe disability) URUGUAY (all disability)

Quintile Without With From Hh. without From Hh. with Without With From Hh. without From Hh. witDisability Disability member w/disab. member w/disab. Disability Disability member w/disab. member w/dis

I 8,0 4,3 7,9 7,4 8,0 4,9 7,8 7,7

II 8,8 5,6 8,8 8,4 8,9 6,4 8,9 8,4

III 9,7 3,6 9,7 9,8 9,7 5,7 9,7 9,4

IV 10,4 4,2 10,3 10,1 10,4 6,6 10,4 9,9

V 11,6 8,2 11,6 11,0 11,6 9,8 11,6 11,2

Total 9,5 4,9 9,5 8,5 9,5 6,2 9,5 8,8


Education-Cicle Lag: Age 22 to 30 (Tertiary Education)

URUGUAY (severe disability) URUGUAY (all disability)

Quintile Without With From Hh. without From Hh. with Without With From Hh. without From Hh. wit

Disability Disability member w/disab. member w/disab. Disability Disability member w/disab. member w/dis

I 7,7 4,4 7,6 7,6 7,7 5,6 7,6 7,5

II 8,7 5,3 8,7 8,1 8,7 6,6 8,7 8,5

III 9,9 4,2 9,8 9,4 9,9 5,9 9,8 9,4

IV 11,2 5,2 11,1 11,8 11,2 7,5 11,2 10,8

V 13,1 5,5 13,1 13,1 13,2 7,1 13,1 13,0

Total 10,1 4,8 10,0 9,0 10,1 6,3 10,1 9,2


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 pro-

ductivity of an individual depends on his human capital, the matching between his

specific skills and his job, his bargaining capabilities, labour market structure, and

any effect of discrimination he may suffer, among others.

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The disability may generate, in the first place, having a lower productivity than

an individual without disability because of the nature of the job. Second, an individ-

ual with disability may face different problems in order to obtain a certain matching

between his abilities and his job. Third, individuals with disabilities may work a dif-

ferent number of hours than non-disabled ones (they may even not participate at all

in the labour market). Fourth, individuals with disabilities may have different levels

of human capital that may be caused by their condition.

To address these questions, we estimated standard Mincer equations and labour mar-

ket participation models. This framework allows to control by standard productivity

measures, namely experience and education, in order to isolate the effect of the dis-

ability 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 (first column). Those figures in-

crease 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 difference is

not particularly significant for males nor females.

Given that for Uruguay two definitions of disability are used, we have two main pan-

els accordingly in Table 9. By focusing on the definition of all disability, we observe

that participation rate is 84% for males and 62% for females considering the whole

population (first column). Those figures increase to 92% and 75% for householdheads, 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

18Experience corresponds to potential experience, i.e., age minus years of education. Through-

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

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Table 8: Chile: Labour Market Participation

CHILE

Participation Rate - All DisabilityPopulation No Disab. Disab. No Disab. Hh. Disab. Hh.

All

Both genders 61 62 34 63 60

Males 77 79 43 79 78

Females 46 47 23 47 44

Household Head


Males 93 94 64 94 90

Females 67 68 39 69 64

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 difference is not particularly big for males nor females, except for females who are

household heads.

4.2.1 Econometric Models

In the first place, we estimate the effect of disability on the wage of disabled individ-

uals. For this purpose, we will estimate a model such as:

whi

= 0 + 1Xi + 2Ddi + ui, (1)

where whi

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 different levels of severity of the

disability by making a breakdown ofDdi into Dhdi for severe disability and Dldi for

39


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Table 9: Uruguay: Labour Market Participation

URUGUAY

Participation Rate - Severe Disability

Population No Disab. Disab. No Disab. Hh. Disab. Hh.

All


Males 83 84 23 84 85Females 62 62 16 63 54

Household Head


Males 91 92 38 92 92

Females 73 74 29 74 66

Participation Rate - all Disability

No Disab. Disab. No Disab. Hh. Disab. Hh.

All

Both genders 73 39 73 72

Males 85 44 84 85

Females 63 33 63 60

Household Head

Both genders 88 54 88 85

Males 92 59 93 91

Females 75 45 76 69

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all disability.

Since many disabled individuals may decide not to participate in the labour mar-

ket, we will attempt to identify the effect 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:

phi

= f(0 + 1Xi + 2Ddi), (2)

where phi

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 esti-

mated using a Probit model and the standard errors are corrected for heteroscedastity.

Finally, the tables show the marginal effects.

In addition to the effect 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 different 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 affect the probability of that other member to participate in

the labour market. Also, it may affect the number of hours that other member may

decide to work. Finally, it may affect the type of job that other individuals get, where

flexibility may be a highly desirable characteristic, and matching of abilities may be

sacrificed 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 esti-

mate,

wh

i = 0 + 1Xi + 2Ddh + ui, (3)

phi

= f(0 + 1Xi + 2Ddh), (4)

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

19Equations (3) and (4) will be estimated for Uruguay using both definition of disability

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4.3 Earnings and returns

The regression of wage equations for Chile are summarized in Table 10. In the first

column we present the basic model,20 where most of the variables are statistically

significant at the 95% confidence. Experience has a positive effect 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

20Age 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 significant. Heckman

selection models were also run for females, although the results did not vary significantly. Hence,

for the sake of simplicity, they are not presented in this paper.21See Contreras (2003), Larranaga and Contreras (2001)

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Table10:Chile:OLSRegressionsofHourlyWage

CHILE

LNWage/HR

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

All

Ma

les

Females

All

Ma

les

Fema

les

All

Ma

les

Fema

les

A

ll

Ma

les

Fema

les

Experience

0.0

21

0.0

27

0.0

10

0.0

20

0.0

27

0.0

11

0.021

0.0

27

0.0

1

0.0

2

0.0

27

0.0

11

(18.7

6)**

(19.3

5)**

(5.7

5)**

(18.4

8)**

(18.9

6)**

(5.8

1)**

(18.74)**

(19.3

3)**

(5.7

5)**

(18.48)**

(18.9

5)**

(5.8

2)**

Experience

2

0.0

00

0.0

00

0.0

00

0.0

00

0.0

00

0.0

00

0.000

0.0

00

0.0

00

0.000

0.0

00

0.0

00

(0.2

3)

(3.9

6)**

(4.1

9)**

-0.0

4

(3.6

0)**

(4.1

5)**

-0.2

1

(3.9

4)**

(4.1

9)**

-0

.03

(3.5

9)**

(4.1

4)**

Education

0.1

42

0.1

44

0.1

37

0.1

42

0.1

44

0.1

38

0.142

0.1

44

0.1

37

0.142

0.1

44

0.1

38

(97.8

5)**

(78.1

6)**

(59.3

9)*

*

(98.2

8)**

(78.1

0)**

(60.1

5)**

(97.84)**

(78.1

5)**

(59.3

9)**

(98.20)**

(78.0

2)**

(60.1

3)**

Dummy

Gen

der

(Ma

le=1)

0.1

93

0.1

93

0.193

0.193

(21.2

5)**

(21.1

7)**

(21.25)**

(21.16)**

DummyDisab.A

ll

-0.0

85

-0.0

88

-0.0

85

-0.0

76

-0.0

75

-0.0

86

(2.2

2)*

(2.0

2)*

(1.1)

(1.8

8)

(1.6

3)

(1.0

7)

DummyDisab.inHh.A

ll

-0.0

83

-0.0

92

-0.0

66

-0.0

78

-0.0

86

-0.0

64

(5.8

8)**

(5.1

6)**

(2.8

7)**

(5.3

4)**

(4.6

4)**

(2.6

8)**

Disa

b.*

Ethnicorig.

-0.1

82

-0.2

24

0.0

19

(2.1

1)*

(2.3

9)*

(0.0

9)

Disa

b.inHh*Ethnicorig.

-0.0

92

-0.1

25

-0.0

34

(2.05)*

(2.1

0)*

(0.5

0)

Constant

4.8

68

4.9

66

5.0

30

4.8

70

4.9

72

5.0

24

4.869

4.9

66

5.0

3

4.871

4.9

73

5.0

24

(209.9

6)**

(180.6

2)**

(144.6

2)**

(209.4

5)**

(179.6

6)**

(145.71)**

(209.9

7)**

(180.6

2)**

(144.6

3)**

(209.3

8)**

(179.5

9)**

(145.6

9)**

Observations

79302

53783

25519

77921

52767

25154

79302

53783

25519

77

921

52767

25154

R-square

d

0.3

2

0.3

3

0.2

9

0.3

2

0.3

3

0.30

0.3

2

0.3

3

0.2

9

0.3

2

0.3

3

0.3

Ro

busttstatisticsinparentheses

*significantat5%;

**significantat1%

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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 confirm 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, flexible

working hours. Finally, columns 7 to 12 show that there are significant effects of the

interaction between Ethnicity and disability. The evidence suggests that, controlling

for human capital, disabled-indigineous individuals receive 20% less in the labor mar-

ket. Half of this negative effect 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 specification, this table allows us to examine differences 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 significantly when workers are disabled. For

the whole sample of disabled people, the return to education is 9,4%, five points lessthan the rest of society. Separating by gender, males have a return of 10,2%, while

females only obtain 7,1%.

22According to Montero, Garces and Agurto (2006), in Chile, the ethnic wage discriminatio is

9,18%.

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Table 11: Returns to Education: Chile(1) (2) (3) (4) (5) (6)

Without Disability only w/ All Disability

All Males Females All Males Females

Experience 0,021 0,027 0,011 0,015 0,034 -0,022(18.62)** (19.07)** (5.88)** (1.42) (3.02)** (1.06)

Experience2 0,000 0,000 0,000 0,000 0,000 0,000

(0.08) (3.69)** (4.10)** (0.42) (1.82) (1.22)

Education 0,142 0,145 0,138 0,094 0,102 0,071

(98.29)** (78.26)** (60.06)** (7.29)** (7.15)** (2.50)*

Dummy Gender (Male=1) 0,194 0,174

(21.20)** (2.04)*

Constant 4,855 4,955 5,013 5,466 5,295 6,239

(208.56)** (179.08)** (144.85)** (25.29)** (24.94)** (13.17)**

Observations 77921 52767 25154 1381 1016 365

R-squared 0,32 0,33 0,30 0,17 0,21 0,13

Robust t statistics in parentheses

* significant at 5%; ** significant at 1%

The regression of wage equations for Uruguay are summarized in Table 12. In the

first column we present the basic model, where all variables are statistically signifi-

cant at the 95% confidence. Experience has a positive effect on hourly wage, there

is 18% gender gap in favour of males, which is similar to the figure for Chile (20%).

In Uruguay the return to schooling fluctuates between 12% and 13%, lower than the

return to education exhibited in Chile.

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Table12:Urug

uay:OLSRegressionsofHourlyWage

URUGUAY

LNWage/HR

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

All

Ma

les

Fema

les

All

Ma

les

Fema

les

All

Ma

les

Fema

les

All

Ma

les

Fema

les

Experience

0.0

45

0.0

53

0.0

37

0.0

45

0.0

53

0.0

37

0.0

45

0.0

53

0.0

37

0.0

46

0.0

52

0.0

38

(29.9

2)**

(26.0

2)**

(15.9

9)**

(29.8

9)**

(26.0

4)**

(15.9

6)**

(29.9

2)**

(26.0

6)**

(15.9

6)**

(29.8

0)**

(25.5

5)**

(16.3

8)**

Experience

2

-0.0

01

-0.0

01

0

-0.0

01

-0.0

01

0

-0

.001

-0.0

01

0

-0.0

01

-0.0

01

0

(18.6

8)**

(16.6

8)**

(9.8

0)**

(18.6

7)**

(16.7

0)**

(9.7

7)**

(18.5

7)**

(16.6

2)**

(9.7

1)**

(18.5

5)**

(16.1

9)**

(10.1

6)**

Education

0.1

28

0.1

31

0.1

22

0.1

27

0.1

31

0.1

21

0.1

28

0.1

31

0.1

22

0.1

27

0.1

3

0.1

22

(86.0

2)**

(64.1

3)**

(56.0

8)**

(85.4

9)**

(

socio economic impact of disability in chile and uruguay

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