Hearing loss and disability exit: Measurement issues and coping strategies

•We estimate the causal effect of functional hearing on exit via disability benefits.•The endogeneity bias in functional hearing is more severe among men.•Functional hearing problems increase the likelihood of receiving disability benefits.•The effects of functional hearing on disability exit are stronger for men than women.•Clinical hearing and coping strategies independently affect disability exit.

Hearing loss is one of the most common conditions related to aging, and previous descriptive evidence links it to early exit from the labor market. These studies are usually based on self-reported hearing difficulties, which are potentially endogenous to labor supply. We use unique representative data collected in the spring of 2005 through in-home interviews. The data contains self-reported functional and clinically-measured hearing ability for a representative sample of the Danish population aged 50-64. We estimate the causal effect of hearing loss on early retirement via disability benefits, taking into account the endogeneity of functional hearing. Our identification strategy involves the simultaneous estimation of labor supply, functional hearing, and coping strategies (i.e. accessing assistive devices at work or informing one's employer about the problem). We use hearing aids as an instrument for functional hearing. Our main empirical findings are that endogeneity bias is more severe for men than women and that functional hearing problems significantly increase the likelihood of receiving disability benefits for both men and women. However, relative to the baseline the effect is larger for men (47% vs. 20%, respectively). Availability of assistive devices in the workplace decreases the likelihood of receiving disability benefits, whereas informing an employer about hearing problems increases this likelihood.