Book Description

People with disabilities are underemployed across the world. With the goal of increasing their representation, more than 100 countries have established quota regulations requiring firms to hire people with disabilities. This paper studies the implications of enforcing modest disability hiring quotas for workers and firms. Using the introduction of a reform in Brazil that enhanced enforcement of a new hiring quota regulation, my market-level analysis finds that people with disabilities in local labor markets more exposed to the reform experienced larger increases in employment and earnings. To explore the margins along which firms respond to the quota scheme, I leverage variation in enforcement across firms. This analysis reveals three key adjustment margins. First, firms tend to comply with the quota by hiring workers with disabilities into low-paying, less skilled jobs. Second, consistent with statistical discrimination, workers with disabilities hired prior to the quota experience reduced wage growth and promotion rates. Third, the quota does not come at a cost to workers without disabilities in terms of wages or employment, or to firms in terms of closure. Using the compliance decision of firms to the quota, I estimate that the marginal worker with disabilities hired under the quota has a marginal revenue product close to their wage. Through the lens of a model of enforcement of hiring quotas with imperfect compliance, I show that the policy generates aggregate welfare gains. My findings demonstrate that, in labor markets under imperfect competition, mandating modest increases in employment for the disadvantaged can promote redistribution and improve welfare.