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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. 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.
  2. 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.
  3. 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.
  4. Philip de Jong & Maarten Lindeboom & Bas van der Klaauw, 2011. "Screening Disability Insurance Applications," Journal of the European Economic Association, European Economic Association, vol. 9(1), pages 106-129, 02.
  5. Hausman & Newey & Woutersen & Chao & Swanson, 2009. "Instrumental Variable Estimation with Heteroskedasticity and Many Instruments," Economics Working Paper Archive 566, The Johns Hopkins University,Department of Economics.
  6. Lahiri, Kajal & Song, Jae & Wixon, Bernard, 2008. "A model of Social Security Disability Insurance using matched SIPP/Administrative data," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 4-20, July.
  7. 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.
  8. 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 7075, Mathematica Policy Research.
  9. 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 wp258, University of Michigan, Michigan Retirement Research Center.
  10. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  11. 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 wp241, University of Michigan, Michigan Retirement Research Center.
  12. Abadie, Alberto, 2003. "Semiparametric instrumental variable estimation of treatment response models," Journal of Econometrics, Elsevier, vol. 113(2), pages 231-263, April.
  13. Bound, John, 1989. "The Health and Earnings of Rejected Disability Insurance Applicants," American Economic Review, American Economic Association, vol. 79(3), pages 482-503, June.
  14. 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.
  15. 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.
  16. David Autor & Mark Duggan, 2006. "The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding," NBER Working Papers 12436, National Bureau of Economic Research, Inc.
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Cited by:
  1. 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 wp241, University of Michigan, Michigan Retirement Research Center.
  2. 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 7214, Mathematica Policy Research.
  3. David C. Stapleton, 2012. "Testimony for Hearing on Securing the Future of the Social Security Disability Insurance Program," Mathematica Policy Research Reports 7543, Mathematica Policy Research.
  4. 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.
  5. 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 7075, Mathematica Policy Research.
  6. Eric French & John Bailey Jones, 2010. "Public pensions and labor supply over the life cycle," Working Paper Series WP-2010-09, Federal Reserve Bank of Chicago.
  7. Andreas Ravndal Kostol & Magne Mogstad, 2014. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work," American Economic Review, American Economic Association, vol. 104(2), pages 624-55, February.
  8. 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 wp258, University of Michigan, Michigan Retirement Research Center.
  9. 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.
  10. Nicole Maestas & Jae Song, 2011. "The Labor Supply Effects of Disability Insurance: Evidence from Automatic Conversion Using Administrative Data," Working Papers wp247, University of Michigan, Michigan Retirement Research Center.
  11. David Stapleton & Gina Livermore, 2011. "Costs, Cuts, and Consequences: Charting a New Course for Working-Age People with Disabilities," Mathematica Policy Research Reports 7091, Mathematica Policy Research.

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