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The Effect of Disability Insurance Receipt on Labor Supply

Author

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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.

Suggested Citation

  • 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.
    • 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 listed on IDEAS

    as
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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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