Advanced Search
MyIDEAS: Login

Disability Insurance Rejection Rates and the Labor Supply of Older Workers

Contents:

Author Info

  • Jonathan Gruber
  • Jeffrey D. Kubik

Abstract

Disability Insurance (DI), which provides income support to disabled workers, has been criticized for inducing a large fall in the labor force participation rate of older workers. We study the effects of one policy response designed to address this moral hazard problem: raising the rate at which DI claims are denied. Initial DI applications are decided at the state level, and, in response to a funding crisis for the DI program in the late 1970s, the states raised their rejection rates for first time applicants by 30% on average. The extent of this rise, however, varied substantially across states. We use this variation to estimate a significant reduction in labor force non-participation among older workers in response to denial rate rises. A 10% increase in denial rates led to a 2.7% fall in non- participation among 45-64 year old males; between 1/2 and 2/3 of this effect is a true reduction in labor force leaving, with the remainder accounted for by the return to work of denied applicants. We find some support for the notion that increases in denial rates effectively target their incentive effects to more able individuals; the fall in labor force non-participation was much stronger among more able workers, according to an anthropometric measure of disability.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w4941.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4941.

as in new window
Length:
Date of creation: Nov 1994
Date of revision:
Handle: RePEc:nbr:nberwo:4941

Note: AG HC LS PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Parsons, Donald O, 1980. "The Decline in Male Labor Force Participation," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 117-34, February.
  2. Rebecca Blank & David Card & Whitney Newey, 1988. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," Working Papers 623, Princeton University, Department of Economics, Industrial Relations Section..
  3. Diamond, Peter & Sheshinski, Eytan, 1995. "Economic aspects of optimal disability benefits," Journal of Public Economics, Elsevier, vol. 57(1), pages 1-23, May.
  4. Halpern, Janice & Hausman, Jerry A., 1986. "Choice under uncertainty: A model of applications for the social security disability insurance program," Journal of Public Economics, Elsevier, vol. 31(2), pages 131-161, November.
  5. Butler, J S, et al, 1987. "Measurement Error in Self-reported Health Variables," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 644-50, November.
  6. P. A. Diamond & J. A. Mirrlees, 1977. "A Model of Social Insurance With Variable Retirement," Working papers 210, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Haveman, Robert H & Wolfe, Barbara L, 1984. "The Decline in Male Labor Force Participation: Comment," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 532-41, June.
  8. Howard P. Marvel, 1982. "An Economic Analysis of the Operation of Social Security Disability Insurance," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 393-412.
  9. Bound, John & Waidmann, Timothy, 1992. "Disability Transfers, Self-Reported Health, and the Labor Force Attachment of Older Men: Evidence from the Historical Record," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1393-419, November.
  10. David A. Wise & Robin L. Lumsdaine, 1990. "Aging and Labor Force Participation: A Review of Trends and Explanations," NBER Working Papers 3420, National Bureau of Economic Research, Inc.
  11. Jonathan S. Leonard, 1979. "The Social Security Disability Program and Labor Force Participation," NBER Working Papers 0392, National Bureau of Economic Research, Inc.
  12. Jonathan S. Leonard, 1985. "Labor Supply Incentives and Disincentives for the Disabled," NBER Working Papers 1744, National Bureau of Economic Research, Inc.
  13. Rebecca M. Blank & Patricia Ruggles, 1993. "When Do Women Use AFDC & Food Stamps? The Dynamics of Eligibility vs. Participation," NBER Working Papers 4429, National Bureau of Economic Research, Inc.
  14. Janice Halpern & Jerry A. Hausman, 1985. "Choice Under Uncertainty: A Model of Applications for the Social Security Disability Insurance Program," NBER Working Papers 1690, National Bureau of Economic Research, Inc.
  15. Parsons, Donald O, 1991. "Self-Screening in Targeted Public Transfer Programs," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 859-76, August.
  16. Kathryn H. Anderson & Richard V. Burkhauser, 1985. "The Retirement-Health Nexus: A New Measure of an Old Puzzle," Journal of Human Resources, University of Wisconsin Press, vol. 20(3), pages 315-330.
  17. Jerry A. Hausman & David A. Wise, 1985. "Social Security, Health Status, and Retirement," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 159-192 National Bureau of Economic Research, Inc.
  18. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  19. Parsons, Donald O, 1982. "The Male Labour Force Participation Decision: Health, Reported Health, and Economic Incentives," Economica, London School of Economics and Political Science, vol. 49(193), pages 81-91, February.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4941

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.