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Measuring the Spillover to Disability Insurance Due to the Rise in the Full Retirement Age

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  • Norma B. Coe
  • Kelly Haverstick

Abstract

The increase in the full retirement age in the Social Security program provides exogenous variation in the generosity in the Social Security Disability Insurance (SSDI) program, based only on birth year. We exploit this variation to estimate how responsive SSDI applications are to the financial incentive to apply. We find that a 1-percentage-point decrease in the retirement-to-disability benefit ratio leads to a 0.25-percentage-point increase in the SSDI application rate for the sample, which represents an 8-percent increase in applications per two years. When weighted to account for sampling design, we estimate that this change in the financial incentive accounted for about 5 percent of the SSDI applications in 2009. However, we do not find a corresponding increase in SSDI receipt based on the financial incentives. In addition, we find little difference in the covariates for individuals who eventually receive SSDI, suggesting that the increase in applications may increase the administrative costs of the SSDI program, but should not have a dramatic impact on the long-term financial solvency of the program.

Suggested Citation

  • Norma B. Coe & Kelly Haverstick, 2010. "Measuring the Spillover to Disability Insurance Due to the Rise in the Full Retirement Age," Working Papers, Center for Retirement Research at Boston College wp2010-20, Center for Retirement Research, revised Dec 2010.
  • Handle: RePEc:crr:crrwps:wp2010-20
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    File URL: http://crr.bc.edu/working-papers/measuring-the-spillover-to-disability-insurance-due-to-the-rise-in-the-full-retirement-age/
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    Cited by:

    1. Geyer, Johannes & Welteke, Clara, 2017. "Closing Routes to Retirement: How Do People Respond?," IZA Discussion Papers 10681, Institute for the Study of Labor (IZA).
    2. Lex Borghans & Anne C. Gielen & Erzo F. P. Luttmer, 2014. "Social Support Substitution and the Earnings Rebound: Evidence from a Regression Discontinuity in Disability Insurance Reform," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 34-70, November.
    3. repec:eee:labeco:v:47:y:2017:i:c:p:216-231 is not listed on IDEAS
    4. Kadir Atalay & Garry F. Barrett, 2015. "The Impact of Age Pension Eligibility Age on Retirement and Program Dependence: Evidence from an Australian Experiment," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 71-87, March.
    5. Engels, Barbara & Geyer, Johannes & Haan, Peter, 2017. "Pension incentives and early retirement," Labour Economics, Elsevier, vol. 47(C), pages 216-231.
    6. Welteke, Clara & Geyer, Johannes & Haan, Peter, 2016. "Early retirement eligibility and employment behavior: evidence from a cohort based pension reform," Annual Conference 2016 (Augsburg): Demographic Change 145783, Verein für Socialpolitik / German Economic Association.

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