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Labor Supply Incentives and Disincentives for the Disabled

  • Jonathan S. Leonard

The past three decades have witnessed a large and puzzling decline in labor force participation by prime-age males, and a correspondingly large increase in Social Security disability beneficiary roles.This paper reviews the analytical studies that have attempted to determine the causal links between disability, beneficiary status, and labor-force non-participation. Although disability is often thought of as a purely medically determined condition with no labor supply responsiveness to economic factors, models of Social Security disability beneficiary status as an economic decision have had some success in explaining both the growth of the program and the decline in labor force participation. These studies have, however, produced a wide range of estimates of labor supply elasticity, in part because of the difficulty of the underlying econometric problem of estimating the response to two (or more) potential income streams, only one of which is usually observed for any individual.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1744.

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Date of creation: Oct 1985
Date of revision:
Publication status: published as Leonard, Jonathan S. "Labor Supply Incentives and Disincentives for the Disabled," Disability and the Labor Market: Economic Problems, Policies, and Programs, eds. M. Berkowitz & M.A. Hill, Ithaca, NY: ILR Press, 1986, pp. 64-94.
Handle: RePEc:nbr:nberwo:1744
Note: LS
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