I use a dynamic mixed multinomial logit model with unobserved heterogeneity to study the
impact of work limiting disabilities on disaggregated labour choices. The first seven waves of
the Household Income and Labour Dynamics in Australia survey are used to investigate this
relationship. Findings point out to strong state dependence in employment choices. Further,
the impact of disability on employment outcomes is highly significant. Model simulations
suggest that high cross and own state dependence can amplify a one-off disability shock to
alter the probability of full time employment and nonparticipation permanently, especially for
low skilled individuals.