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The Effect of Disability Insurance Receipt on Labor Supply

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  • Eric French
  • Jae Song

Abstract

This paper exploits the effectively random assignment of judges to Disability Insurance cases to estimate the causal impact of Disability Insurance receipt on labor supply. We find that benefit receipt reduces labor force participation by 26 percentage points three years after a disability determination decision, although the reduction is smaller for older people, college graduates, and those with mental illness. OLS and instrumental variables estimates are similar. Furthermore, over 60 percent of those denied benefits by an administrative law judge are subsequently allowed benefits within ten years, showing that most applicants apply, reapply, and appeal until they get benefits.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 6 (2014)
Issue (Month): 2 (May)
Pages: 291-337

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Handle: RePEc:aea:aejpol:v:6:y:2014:i:2:p:291-337

Note: DOI: 10.1257/pol.6.2.291
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References

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  1. Norman R. Swanson & John C. Chao & Jerry A. Hausman & Whitney K. Newey & Tiemen Woutersen, 2011. "Instrumental Variable Estimation with Heteroskedasticity and Many Instruments," Departmental Working Papers, Rutgers University, Department of Economics 201111, Rutgers University, Department of Economics.
  2. de Jong, Philip & Lindeboom, Maarten & van der Klaauw, Bas, 2006. "Screening disability insurance applications," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2006:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. Joseph J. Doyle Jr., 2007. "Child Protection and Child Outcomes: Measuring the Effects of Foster Care," American Economic Review, American Economic Association, vol. 97(5), pages 1583-1610, December.
  4. Su Liu & David C. Stapleton, 2011. "Longitudinal Statistics on Work Activity and Use of Employment Supports for New Social Security Disability Insurance Beneficiaries," Mathematica Policy Research Reports, Mathematica Policy Research 7075, Mathematica Policy Research.
  5. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  6. Nicole Maestas & Kathleen J. Mullen & Alexander Strand, 2010. "Does Disability Insurance Receipt Discourage Work? Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt," Working Papers, RAND Corporation Publications Department 853, RAND Corporation Publications Department.
  7. Benitez-Silva, Hugo & Buchinsky, Moshe & Chan, Hiu Man & Rust, John & Sheidvasser, Sofia, 1999. "An empirical analysis of the social security disability application, appeal, and award process," Labour Economics, Elsevier, vol. 6(2), pages 147-178, June.
  8. Chen, Susan & van der Klaauw, Wilbert, 2008. "The work disincentive effects of the disability insurance program in the 1990s," Journal of Econometrics, Elsevier, Elsevier, vol. 142(2), pages 757-784, February.
  9. David H. Autor & Mark G. Duggan, 2006. "The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 71-96, Summer.
  10. Julie Berry Cullen & Brian A. Jacob & Steven Levitt, 2003. "The Effect of School Choice on Student Outcomes: Evidence from Randomized Lotteries," NBER Working Papers 10113, National Bureau of Economic Research, Inc.
  11. Lahiri, Kajal & Song, Jae & Wixon, Bernard, 2008. "A model of Social Security Disability Insurance using matched SIPP/Administrative data," Journal of Econometrics, Elsevier, Elsevier, vol. 145(1-2), pages 4-20, July.
  12. Jianting Hu & Kajal Lahiri & Denton R. Vaughan & Bernard Wixon, 2001. "A Structural Model Of Social Security'S Disability Determination Process," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 348-361, May.
  13. David Autor & Nicole Maestas & Kathleen Mullen & Alexander Strand, 2011. "Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants," Working Papers, University of Michigan, Michigan Retirement Research Center wp258, University of Michigan, Michigan Retirement Research Center.
  14. Bound, John, 1991. "The Health and Earnings of Rejected Disability Insurance Applicants: Reply," American Economic Review, American Economic Association, vol. 81(5), pages 1427-34, December.
  15. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  16. John Bound, 1989. "The Health and Earnings of Rejected Disability Insurance Applicants," NBER Working Papers 2816, National Bureau of Economic Research, Inc.
  17. Abadie, Alberto, 2003. "Semiparametric instrumental variable estimation of treatment response models," Journal of Econometrics, Elsevier, Elsevier, vol. 113(2), pages 231-263, April.
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Citations

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Cited by:
  1. Andreas Ravndal Kostøl & Magne Mogstad, 2013. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work," NBER Working Papers 19016, National Bureau of Economic Research, Inc.
  2. Eric French & John Jones, 2012. "Public pensions and labor supply over the life cycle," International Tax and Public Finance, Springer, Springer, vol. 19(2), pages 268-287, April.
  3. David C. Stapleton, 2012. "Testimony for Hearing on Securing the Future of the Social Security Disability Insurance Program," Mathematica Policy Research Reports, Mathematica Policy Research 7543, Mathematica Policy Research.
  4. Nicole Maestas & Jae Song, 2011. "The Labor Supply Effects of Disability Insurance: Evidence from Automatic Conversion Using Administrative Data," Working Papers, University of Michigan, Michigan Retirement Research Center wp247, University of Michigan, Michigan Retirement Research Center.
  5. Laun, Tobias & Wallenius, Johanna, 2012. "A Life Cycle Model of Health and Retirement: The Case of Swedish Pension Reform," Working Paper Series in Economics and Finance 741, Stockholm School of Economics.
  6. David R. Mann & David C. Stapleton, 2011. "Fiscal Austerity and the Transition to Twenty-First Century Disability Policy: A Road Map," Mathematica Policy Research Reports, Mathematica Policy Research 7214, Mathematica Policy Research.
  7. David Autor & Nicole Maestas & Kathleen Mullen & Alexander Strand, 2011. "Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants," Working Papers, University of Michigan, Michigan Retirement Research Center wp258, University of Michigan, Michigan Retirement Research Center.
  8. David Stapleton & Gina Livermore, 2011. "Costs, Cuts, and Consequences: Charting a New Course for Working-Age People with Disabilities," Mathematica Policy Research Reports, Mathematica Policy Research 7091, Mathematica Policy Research.
  9. Nicole Maestas & Kathleen Mullen & Alexander Strand, 2012. "Does Disability Insurance Receipt Discourage Work? Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt," Working Papers, University of Michigan, Michigan Retirement Research Center wp241, University of Michigan, Michigan Retirement Research Center.
  10. Markussen, Simen & Mykletun, Arnstein & Røed, Knut, 2012. "The case for presenteeism — Evidence from Norway's sickness insurance program," Journal of Public Economics, Elsevier, vol. 96(11), pages 959-972.
  11. Su Liu & David C. Stapleton, 2011. "Longitudinal Statistics on Work Activity and Use of Employment Supports for New Social Security Disability Insurance Beneficiaries," Mathematica Policy Research Reports, Mathematica Policy Research 7075, Mathematica Policy Research.

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