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Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants

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Author Info

  • David Autor

    (MIT and NBER)

  • Nicole Maestas

    (RAND)

  • Kathleen Mullen

    (RAND)

  • Alexander Strand

    (Social Security Administration)

Abstract

An influential body of research studies the labor supply and earnings of denied Social Security Disability Insurance (SSDI) applicants to estimate the potential employment and earnings of those awarded benefits. This research design implicitly treats employability as a stable applicant attribute that is not directly impacted by the process of applying for SSDI benefits. If, plausibly, applicants’ employment potential deteriorates while they are out of the labor force, then the labor force participation of denied applicants -- who spend an average of 10 months seeking benefits -- may understate their employment potential at the time of application. This paper tests whether the duration of SSDI applications causally affects applicants’ subsequent employment. We use a unique Social Security Administration workload database to identify exogenous variation in applicants’ initial decision times induced by differences in processing speed among the disability examiners to which they are randomly assigned. This variation significantly affects applicants’ total processing time but, importantly, is uncorrelated with their initial award and denial outcomes. We find that longer processing times reduce the employment and earnings of SSDI applicants in the years after their initial decision. A one standard deviation (2.4 month) increase in initial processing time reduces annual employment rates by 1 percentage point (3.2%) in years two, three and four post-decision. Extrapolating these effects to total applicant processing times, we estimate that the SSDI determination process directly reduces the post-application employment of denied applicants by approximately 3.6 percentage points (7%) and allowed applicants by approximately 5.2 percentage points (33%).

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File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp258.pdf
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Bibliographic Info

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp258.

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Length: 43 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:mrr:papers:wp258

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References

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  1. 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.
  2. 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.
  3. Till von Wachter & Jae Song & Joyce Manchester, 2011. "Trends in Employment and Earnings of Allowed and Rejected Applicants to the Social Security Disability Insurance Program," American Economic Review, American Economic Association, vol. 101(7), pages 3308-29, December.
  4. 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.
  5. Susan Chen & Wilbert van der Klaauw, 2006. "The Work Disincentive Effects of the Disability Insurance Program in the 1990s," Working Papers 06-05, Center for Economic Studies, U.S. Census Bureau.
  6. Parsons, Donald O, 1991. "The Health and Earnings of Rejected Disability Insurance Applicants: Comment," American Economic Review, American Economic Association, vol. 81(5), pages 1419-26, December.
  7. Eric French & Jae Song, 2014. "The Effect of Disability Insurance Receipt on Labor Supply," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 291-337, May.
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Cited by:
  1. Yonatan Ben-Shalom & Arif Mamun, 2013. "Return-to-Work Outcomes Among Social Security Disability Insurance Program Beneficiaries," Mathematica Policy Research Reports 7820, Mathematica Policy Research.
  2. Yonatan Ben-Shalom & Arif A. Mamun, 2013. "Return-to-Work Outcomes Among Social Security Disability Insurance Program Beneficiaries," Mathematica Policy Research Reports 7987, Mathematica Policy Research.
  3. Kostol, Andreas Ravndal & Mogstad, Magne, 2012. "How Financial Incentives Induce Disability Insurance Recipients to Return to Work," IZA Discussion Papers 6702, Institute for the Study of Labor (IZA).
  4. Eric French & Jae Song, 2009. "The effect of disability insurance receipt on labor supply," Working Paper Series WP-09-05, Federal Reserve Bank of Chicago.
  5. Timothy J. Moore, 2014. "The Employment Effect of Terminating Disability Benefits," NBER Working Papers 19793, National Bureau of Economic Research, Inc.
  6. Rothstein, Jesse & Valletta, Robert G., 2014. "Scraping by: Income and program participation after the loss of extended unemployment benefits," Working Paper Series 2014-6, Federal Reserve Bank of San Francisco.
  7. Johannes F. Schmieder & Till M. von Wachter & Stefan Bender, 2013. "The Causal Effect of Unemployment Duration on Wages: Evidence from Unemployment Insurance Extensions," NBER Working Papers 19772, National Bureau of Economic Research, Inc.
  8. David R. Mann & Arif Mamun & Jeffrey Hemmeter, 2013. "Employment, Earnings, and Primary Impairments Among Beneficiaries of Social Security Disability Programs," Mathematica Policy Research Reports 7999, Mathematica Policy Research.
  9. David H. Autor, 2011. "The Unsustainable Rise of the Disability Rolls in the United States: Causes, Consequences, and Policy Options," NBER Working Papers 17697, National Bureau of Economic Research, Inc.

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