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Induced Entry into the Social Security Disability Program: Using Past SGA Changes as a Natural Experiment

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Author Info

  • Nicole Maestas

    (RAND Corporation)

  • Kathleen J. Mullen

    (RAND Corporation)

  • Gema Zamarro

    (RAND Corporation)

Abstract

The number of American adults receiving benefits from the Social Security Disability Insurance (SSDI) program has increased dramatically over the past several decades. A proposed solution to rising program costs is to change program rules to encourage fully or partially recovered SSDI beneficiaries to return to work. One such option is a benefit offset policy, which would reduce SSDI benefits by $1 for every $2 of earned income. While a benefit offset could generate savings from increased labor supply and program exit among current beneficiaries, it could also generate unintended costs if the more generous work rules induce significant numbers of working individuals to apply for benefits. In this paper we examine how past changes in a closely related program parameter, the Substantial Gainful Activity (SGA) threshold, have affected SSDI applications. We exploit changes over time and across states in real relative SGA levels, relative to local average wages. We find that a 7 percentage point (30%) increase in the real relative SGA (on par with the 1999 increase from $500 to $700 per month) was associated with a 4.7% increase in applications.

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Bibliographic Info

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp262.

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Length: 35 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:mrr:papers:wp262

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  1. Hilary Williamson Hoynes & Robert Moffitt, 1997. "Tax Rates and Work Incentives in the Social Security Disability Insurance Program: Current Law and Alternative Reforms," NBER Working Papers 6058, National Bureau of Economic Research, Inc.
  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. Dan Black & Kermit Daniel & Seth Sanders, 2002. "The Impact of Economic Conditions on Participation in Disability Programs: Evidence from the Coal Boom and Bust," American Economic Review, American Economic Association, vol. 92(1), pages 27-50, March.
  4. Jody Schimmel & David C. Stapleton & Jae Song, 2010. "How Common is "Parking" Among Social Security Disability Insurance (SSDI) Beneficiaries? Evidence from the 1999 Change in the Level of Substantial Gainful Activity (SGA)," Working Papers wp220, University of Michigan, Michigan Retirement Research Center.
  5. Duggan, Mark & Singleton, Perry & Song, Jae, 2007. "Aching to retire? The rise in the full retirement age and its impact on the social security disability rolls," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1327-1350, August.
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Cited by:
  1. Yonatan Ben-Shalom & David Stapleton, 2013. "Trends in the Composition and Outcomes of Young Social Security Disability Awardees," Mathematica Policy Research Reports 7847, Mathematica Policy Research.
  2. Yonatan Ben-Shalom & David Stapleton, 2013. "Trends in the Composition and Outcomes of Young Social Security Disability Awardees," Working Papers wp284, University of Michigan, Michigan Retirement Research Center.

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