DP7373 | Do Financial Incentives for Firms Promote Employment of Disabled Workers? A Regression Discontinuity Approach

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We study the impact of employment quota on firms' demand for disabled workers. The Austrian Disabled Persons Employment Act (DPEA) requires firms to provide at least one job to a disabled worker per 25 non-disabled workers, a rule which is strictly enforced by non-compliance taxation. We find that, as a result of the discontinuous nature of the non-compliance tax, firms exactly at the quota threshold employ 0.05 (20 % in relative terms) more disabled workers than firms just below the threshold - an effect that is unlikely driven by purposeful selection below the threshold. The flat rate nature of the non-compliance tax generates strong employment effects for low-wage firms and weak effects for high-wage firms. We also find that growing firms passing the quota threshold react with a substantial time-lag but the magnitude of the long-run effect is similar to the one found in cross-section contrasts.