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Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants

  • David Autor

    (MIT and NBER)

  • Nicole Maestas

    (RAND)

  • Kathleen Mullen

    (RAND)

  • Alexander Strand

    (Social Security Administration)

An influential body of research studies the labor supply and earnings of denied Social Security Disability Insurance (SSDI) applicants to estimate the potential employment and earnings of those awarded benefits. This research design implicitly treats employability as a stable applicant attribute that is not directly impacted by the process of applying for SSDI benefits. If, plausibly, applicants’ employment potential deteriorates while they are out of the labor force, then the labor force participation of denied applicants -- who spend an average of 10 months seeking benefits -- may understate their employment potential at the time of application. This paper tests whether the duration of SSDI applications causally affects applicants’ subsequent employment. We use a unique Social Security Administration workload database to identify exogenous variation in applicants’ initial decision times induced by differences in processing speed among the disability examiners to which they are randomly assigned. This variation significantly affects applicants’ total processing time but, importantly, is uncorrelated with their initial award and denial outcomes. We find that longer processing times reduce the employment and earnings of SSDI applicants in the years after their initial decision. A one standard deviation (2.4 month) increase in initial processing time reduces annual employment rates by 1 percentage point (3.2%) in years two, three and four post-decision. Extrapolating these effects to total applicant processing times, we estimate that the SSDI determination process directly reduces the post-application employment of denied applicants by approximately 3.6 percentage points (7%) and allowed applicants by approximately 5.2 percentage points (33%).

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Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp258.

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Length: 43 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:mrr:papers:wp258
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  1. Nicole Maestas & Kathleen J. Mullen & Alexander Strand, 2013. "Does Disability Insurance Receipt Discourage Work? Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt," American Economic Review, American Economic Association, vol. 103(5), pages 1797-1829, August.
  2. John Bound, 1989. "The Health and Earnings of Rejected Disability Insurance Applicants," NBER Working Papers 2816, National Bureau of Economic Research, Inc.
  3. 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.
  4. Bound, John, 1991. "The Health and Earnings of Rejected Disability Insurance Applicants: Reply," American Economic Review, American Economic Association, vol. 81(5), pages 1427-34, December.
  5. Susan Chen & Wilbert van der Klaauw, 2006. "The Work Disincentive Effects of the Disability Insurance Program in the 1990s," Working Papers 06-05, Center for Economic Studies, U.S. Census Bureau.
  6. Parsons, Donald O, 1991. "The Health and Earnings of Rejected Disability Insurance Applicants: Comment," American Economic Review, American Economic Association, vol. 81(5), pages 1419-26, December.
  7. Till von Wachter & Jae Song & Joyce Manchester, 2011. "Trends in Employment and Earnings of Allowed and Rejected Applicants to the Social Security Disability Insurance Program," American Economic Review, American Economic Association, vol. 101(7), pages 3308-29, December.
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