An analysis of the impact of the normative change in disability retirement in Brazil

Abstract:

We investigate the response of federal civil servants to more stringent rules for disability retirement introduced by the Constitutional Amendment 41/2003 (EC 41/2003). First, we look for changes in the health conditions of Brazilians so to speculate on their effects on the use of disability benefit in Brazil. Then, we use those results in setting the control variables of econometric models we use to compare the behavior of civil servants (treatment group) and private sector workers (control group) in terms of the number and incidence of retirement disability. Based on difference in differences (DID) estimates, we conclude that civil servants responded to the incentive created with the new rules by preventing disability retirements and, thus, mitigating the moral hazard problem of social security.

Keywords:
social security; disability retirement; difference-in-differences; incentives; moral hazard