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Asset accumulation and labor force participation of disability insurance applicants

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  • Shu, Pian

Abstract

This paper provides empirical evidence of the existence of forward-looking asset-accumulation behavior among disability-insurance applicants, previously examined only in the theoretical literature. Using panel data from the RAND Health and Retirement Study, I show that rejected applicants for Social Security Disability Insurance (SSDI) possess significantly more assets than accepted applicants immediately prior to application and exhibit lower attachment to the labor force. These empirical results are consistent with the theoretical prediction in Diamond and Mirrlees (1978) and Golosov and Tsyvinski (2006) that certain individuals with high unwillingness to work maximize utility by planning in advance for their future disability insurance application. Because the existing empirical literature on disability insurance does not account for this intertemporal channel, it may underestimate the total work-disincentive effect of SSDI.

Suggested Citation

  • Shu, Pian, 2015. "Asset accumulation and labor force participation of disability insurance applicants," Journal of Public Economics, Elsevier, vol. 129(C), pages 26-40.
  • Handle: RePEc:eee:pubeco:v:129:y:2015:i:c:p:26-40
    DOI: 10.1016/j.jpubeco.2015.06.002
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:pubeco:v:149:y:2017:i:c:p:20-34 is not listed on IDEAS
    2. Müller, Tobias & Boes, Stefan, 2016. "Disability Insurance Benefits and Labor Supply Choices: Evidence from a Discontinuity in Benefit Awards," MPRA Paper 70957, University Library of Munich, Germany.

    More about this item

    Keywords

    Disability insurance; Asset accumulation; Labor force participation; Health and retirement studies (HRS);

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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