IDEAS home Printed from https://ideas.repec.org/p/isu/genres/5189.html
   My bibliography  Save this paper

Workers' Applications to Social Insurance Programs when Earnings and Eligibility Are Uncertain

Author

Listed:
  • Kreider, Brent

Abstract

A worker's decision whether to apply for public transfers may depend not only on his expected level of foregone labor earnings but also on his degree of uncertainty about such earnings. This paper provides theory and evidence about the effects of earnings and eligibility uncertainty on participation decisions. The application rate to the Social Security Disability Insurance program is estimated to be about 15 percent higher than it would be in the absence of earnings risk. As an application to tax policy, optimal marginal wage tax rates may be higher than indicated in previous analyses involving wage uncertainty.

Suggested Citation

  • Kreider, Brent, 1998. "Workers' Applications to Social Insurance Programs when Earnings and Eligibility Are Uncertain," Staff General Research Papers Archive 5189, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:5189
    as

    Download full text from publisher

    File URL: http://www.jstor.org/stable/pdf/10.1086/209939.pdf?acceptTC=true
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Haveman, Robert H. & Wolfe, Barbara L., 1984. "Disability transfers and early retirement: a casual relationship?," Journal of Public Economics, Elsevier, vol. 24(1), pages 47-66, June.
    2. Parsons, Donald O, 1980. "The Decline in Male Labor Force Participation," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 117-134, February.
    3. Block, M K & Heineke, J M, 1973. "The Allocation of Effort under Uncertainty: The Case of Risk-averse Behavior," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 376-385, Part I, M.
    4. Roger H. Gordon & Alan S. Blinder, 1980. "Market Wages, Reservation Wages, and Retirement Decisions," NBER Chapters, in: Econometric Studies in Public Finance, pages 277-308, National Bureau of Economic Research, Inc.
    5. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-265, April.
    6. Eaton, Jonathan & Rosen, Harvey S., 1980. "Labor supply, uncertainty, and efficient taxation," Journal of Public Economics, Elsevier, vol. 14(3), pages 365-374, December.
    7. Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, vol. 8(3), pages 337-360, July.
    8. 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.
    9. Bound, John, 1989. "The Health and Earnings of Rejected Disability Insurance Applicants," American Economic Review, American Economic Association, vol. 79(3), pages 482-503, June.
    10. Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-577, June.
    11. Rebecca M. Blank & David E. Card, 1991. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1157-1189.
    12. 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.
    13. Weiss, Laurence, 1976. "The Desirability of Cheating Incentives and Randomness in the Optimal Income Tax," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1343-1352, December.
    14. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
    15. Dardanoni, Valentino, 1988. "Optimal Choices under Uncertainty: The Case of Two-Argument Utility Functions," Economic Journal, Royal Economic Society, vol. 98(391), pages 429-450, June.
    16. Tressler, J. H. & Menezes, C. F., 1980. "Labor supply and wage rate uncertainty," Journal of Economic Theory, Elsevier, vol. 23(3), pages 425-436, December.
    17. de Meza, David, 1984. "Wage Uncertainty, Expected Utility, and Occupation Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(3), pages 757-762, October.
    18. Hamilton, Jonathan H, 1987. "Optimal Wage and Income Taxation with Wage Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 373-388, June.
    19. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    20. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
    21. Jonathan Eaton & Harvey S. Rosen, 1980. "Optimal Redistributive Taxation and Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(2), pages 357-364.
    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


    Cited by:

    1. Duncan McVicar, 2008. "Why Have Uk Disability Benefit Rolls Grown So Much?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 114-139, February.
    2. Brent Kreider, 2003. "Income Uncertainty and Optimal Redistribution," Southern Economic Journal, John Wiley & Sons, vol. 69(3), pages 718-725, January.
    3. Marjorie L. Baldwin & William G. Johnson, 2000. "Labor Market Discrimination Against Men with Disabilities in the Year of the ADA," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 548-566, January.
    4. Lahiri, Kajal & Song, Jae & Wixon, Bernard, 2008. "A model of Social Security Disability Insurance using matched SIPP/Administrative data," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 4-20, July.
    5. Andrew Foote & Michel Grosz & Ann Stevens, 2019. "Locate Your Nearest Exit: Mass Layoffs and Local Labor Market Response," ILR Review, Cornell University, ILR School, vol. 72(1), pages 101-126, January.
    6. Jacobs, Lindsay, 2023. "Occupations, retirement, and the value of disability insurance," Journal of Public Economics, Elsevier, vol. 225(C).
    7. Neumark, David & Polsky, Daniel & Hansen, Daniel, 1999. "Has Job Stability Declined Yet? New Evidence for the 1990s," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 29-64, October.
    8. Richard V. Burkhauser & J. S. Butler & Gulcin Gumus, 2004. "Dynamic programming model estimates of Social Security Disability Insurance application timing," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 671-685.
    9. Gottschalk, Peter & Moffitt, Robert, 1999. "Changes in Job Instability and Insecurity Using Monthly Survey Data," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 91-126, October.
    10. Bernhardt, Annette & Morris, Martina & Handcock, Mark S & Scott, Marc A, 1999. "Trends in Job Instability and Wages for Young Adult Men," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 65-90, October.
    11. Schmidt, Stefanie R, 1999. "Long-Run Trends in Workers' Beliefs about Their Own Job Security: Evidence from the General Social Survey," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 127-141, October.
    12. Hamish Low & Luigi Pistaferri, 2015. "Disability Insurance and the Dynamics of the Incentive Insurance Trade-Off," American Economic Review, American Economic Association, vol. 105(10), pages 2986-3029, October.
    13. Valletta, Robert G, 1999. "Declining Job Security," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 170-197, October.
    14. Jaeger, David A & Stevens, Ann Huff, 1999. "Is Job Stability in the United States Falling? Reconciling Trends in the Current Population Survey and Panel Study of Income Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 1-28, October.
    15. Kreider, Brent, 1999. "Social Security Disability Insurance: Applications, Awards, and Lifetime Income Flows," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 784-827, October.
    16. Matthew J. Hill & Jose I. Silva & Judit Vall Castello, 2019. "Act now: The effects of the 2008 Spanish disability reform," Health Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 906-920, July.
    17. Burkhauser, Richard V. & Butler, J. S. & Gumus, Gulcin, 2003. "Option Value and Dynamic Programming Model Estimates of Social Security Disability Insurance Application Timing," IZA Discussion Papers 941, Institute of Labor Economics (IZA).
    18. repec:eee:labchp:v:3:y:1999:i:pc:p:3417-3528 is not listed on IDEAS
    19. Zantomio, Francesca, 2013. "Older people's participation in extra-cost disability benefits," Journal of Health Economics, Elsevier, vol. 32(1), pages 320-330.
    20. Farber, Henry S, 1999. "Alternative and Part-Time Employment Arrangements as a Response to Job Loss," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 142-169, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brent Kreider, 2003. "Income Uncertainty and Optimal Redistribution," Southern Economic Journal, John Wiley & Sons, vol. 69(3), pages 718-725, January.
    2. Gottschalk, Peter & Moffitt, Robert, 1999. "Changes in Job Instability and Insecurity Using Monthly Survey Data," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 91-126, October.
    3. Valletta, Robert G, 1999. "Declining Job Security," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 170-197, October.
    4. Gruber, Jonathan & Kubik, Jeffrey D., 1997. "Disability insurance rejection rates and the labor supply of older workers," Journal of Public Economics, Elsevier, vol. 64(1), pages 1-23, April.
    5. Neumark, David & Polsky, Daniel & Hansen, Daniel, 1999. "Has Job Stability Declined Yet? New Evidence for the 1990s," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 29-64, October.
    6. Bernhardt, Annette & Morris, Martina & Handcock, Mark S & Scott, Marc A, 1999. "Trends in Job Instability and Wages for Young Adult Men," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 65-90, October.
    7. Farber, Henry S, 1999. "Alternative and Part-Time Employment Arrangements as a Response to Job Loss," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 142-169, October.
    8. Jaeger, David A & Stevens, Ann Huff, 1999. "Is Job Stability in the United States Falling? Reconciling Trends in the Current Population Survey and Panel Study of Income Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 1-28, October.
    9. Kreider, Brent, 1999. "Social Security Disability Insurance: Applications, Awards, and Lifetime Income Flows," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 784-827, October.
    10. repec:eee:labchp:v:3:y:1999:i:pc:p:3417-3528 is not listed on IDEAS
    11. Schmidt, Stefanie R, 1999. "Long-Run Trends in Workers' Beliefs about Their Own Job Security: Evidence from the General Social Survey," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 127-141, October.
    12. Anderberg, Dan & Andersson, Fredrik, 2003. "Investments in human capital, wage uncertainty, and public policy," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1521-1537, August.
    13. Brent Kreider, 2008. "Optimal Wage Taxation When Human Capital And Employment Are Endogenous," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 660-675, October.
    14. W. Chiu & Louis Eeckhoudt, 2010. "The effects of stochastic wages and non-labor income on labor supply: update and extensions," Journal of Economics, Springer, vol. 100(1), pages 69-83, May.
    15. Sergi Jiménez-Martín & José M. Labeaga & Cristina Vilaplana Prieto, 2006. "Award errors and permanent disability benefits in Spain," Economics Working Papers 966, Department of Economics and Business, Universitat Pompeu Fabra.
    16. Burkhauser, Richard V. & Butler, J. S. & Gumus, Gulcin, 2003. "Dynamic Modeling of the SSDI Application Timing Decision: The Importance of Policy Variables," IZA Discussion Papers 942, Institute of Labor Economics (IZA).
    17. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392, Elsevier.
    18. Elyès Jouini & Clotilde Napp & Diego Nocetti, 2013. "Economic consequences of Nth-degree risk increases and Nth-degree risk attitudes," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 199-224, October.
    19. Bound, John & Stinebrickner, Todd & Waidmann, Timothy, 2010. "Health, economic resources and the work decisions of older men," Journal of Econometrics, Elsevier, vol. 156(1), pages 106-129, May.
    20. Jonathan Gruber & Jeffrey D. Kubik, 1994. "Disability Insurance Rejection Rates and the Labor Supply of Older Workers," NBER Working Papers 4941, National Bureau of Economic Research, Inc.
    21. Kotlikoff, Laurence J, 1984. "Taxation and Savings: A Neoclassical Perspective," Journal of Economic Literature, American Economic Association, vol. 22(4), pages 1576-1629, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:isu:genres:5189. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Curtis Balmer (email available below). General contact details of provider: https://edirc.repec.org/data/deiasus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.