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The Rise in Disability Recipiency and the Decline in Unemployment

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  • David H. Autor
  • Mark G. Duggan

Abstract

Between 1984 and 2000, the share of non-elderly adults receiving benefits from the Social Security Disability Insurance (DI) and Supplemental Security Income (SSI) programs rose from 3.1 to 5.3 percent. We trace this growth to reduced screening stringency and, due to the interaction between growing wage inequality and a progressive benefits formula, a rising earnings replacement rate. We explore the implications of these changes for the level of labor force participation among the less skilled and their employment responses to adverse employment shocks. Following program liberalization in 1984, DI application and recipiency rates became two to three times as responsive to plausibly exogenous labor demand shocks. Contemporaneously, male and female high school dropouts became increasingly likely to exit the labor force rather than enter unemployment in the event of an adverse shock. The liberalization of the disability program appears to explain both facts. Accounting for the role of disability in inducing labor force exit among the low-skilled unemployed, we calculate that the U.S. unemployment rate would be two-thirds of a percentage point higher at present were it not for the liberalized disability system.

Suggested Citation

  • David H. Autor & Mark G. Duggan, 2001. "The Rise in Disability Recipiency and the Decline in Unemployment," NBER Working Papers 8336, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8336
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    Cited by:

    1. John Bound & Julie Berry Cullen & Austin Nichols & Lucie Schmidt, 2002. "The Welfare Implications of Increasing DI Benefit Generosity," Working Papers wp024, University of Michigan, Michigan Retirement Research Center.
    2. Sergi Jiménez-Martín & José M. Labeaga & Cristina Vilaplana Prieto, "undated". "A sequential model for older workers’ labor transitions after a health shock," Working Papers 2005-23, FEDEA.
    3. Mary Daly & Richard V. Burkhauser, 2003. "The Supplemental Security Income Program," NBER Chapters,in: Means-Tested Transfer Programs in the United States, pages 79-140 National Bureau of Economic Research, Inc.
    4. Richard Burkhauser & Mary Daly & Andrew Houtenville & Nigar Nargis, 2002. "Self-reported work-limitation data: What they can and cannot tell US," Demography, Springer;Population Association of America (PAA), vol. 39(3), pages 541-555, August.
    5. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 115-136, Fall.
    6. Smith, Ron & Zoega, Gylfi, 2007. "Global unemployment shocks," Economics Letters, Elsevier, vol. 94(3), pages 433-438, March.
    7. Alena Bicakova, 2006. "Market vs. Institutions: The Trade-off Between Unemployment and Wage Inequality Revisited," Economics Working Papers ECO2006/31, European University Institute.
    8. Yu Hsing, 2009. "Estimating the time-varying NAIRU for Germany and policy implications," Applied Economics Letters, Taylor & Francis Journals, vol. 16(5), pages 469-473.
    9. Amitabh Chandra, 2003. "Is the Convergence of the Racial Wage Gap Illusory?," NBER Working Papers 9476, National Bureau of Economic Research, Inc.
    10. Pilar García-Gómez & Sergi Jiménez-Martín & Judit Vall Castelló, 2012. "Health, Disability, and Pathways into Retirement in Spain," NBER Chapters,in: Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participatio, pages 127-174 National Bureau of Economic Research, Inc.
    11. Harry J. Holzer & Paul Offner, 2001. "Trends in Employment Outcomes of Young Black Men, 1979-2000," JCPR Working Papers 245, Northwestern University/University of Chicago Joint Center for Poverty Research.
    12. Stefan Staubli, 2009. "Tightening the Purse Strings: The Effect of Stricter DI Eligibility Criteria on Labor Supply," University of St. Gallen Department of Economics working paper series 2009 2009-31, Department of Economics, University of St. Gallen.
    13. Gabriel Aranovich & Jay Bhattacharya & Alan M. Garber & Thomas E. MaCurdy, 2009. "Coping with Chronic Disease? Chronic Disease and Disability in Elderly American Population 1982-1999," NBER Working Papers 14811, National Bureau of Economic Research, Inc.
    14. David Black & Yi-Ping Tseng & Roger Wilkins, 2011. "Do changes in demographic characteristics explain declining male employment rates? Examination of the Australian case using a propensity score re-weighting decomposition approach," Applied Economics, Taylor & Francis Journals, vol. 43(28), pages 4215-4226.
    15. Sergi Jiménez-Martín & José M. Labeaga & Cristina Vilaplana Prieto, 2006. "A sequential model of older workers' labor force transitions after a health shock," Health Economics, John Wiley & Sons, Ltd., vol. 15(9), pages 1033-1054.
    16. Ron Smith & Gylfi Zoega, 2004. "Global Shocks and Unemployment Adjustment," Birkbeck Working Papers in Economics and Finance 0401, Birkbeck, Department of Economics, Mathematics & Statistics.
    17. Lars Ljungqvist & Thomas J. Sargent, 2010. "How Sweden's Unemployment Became More Like Europe's," NBER Chapters,in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 189-223 National Bureau of Economic Research, Inc.
    18. Wouter Vermeulen, 2006. "Regional disparities in a small country? An analysis of regional unemployment and participation differentials in the Netherlands from 1975 to 2003," CPB Document 113, CPB Netherlands Bureau for Economic Policy Analysis.
    19. Roger Wilkins, 2003. "Labour Market Outcomes and Welfare Dependence of Persons with Disabilities in Australia," Melbourne Institute Working Paper Series wp2003n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    20. Mikhail Golosov & Aleh Tsyvinski, 2003. "Designing optimal disability insurance," Working Papers 628, Federal Reserve Bank of Minneapolis.
    21. Bound, John & Cullen, Julie Berry & Nichols, Austin & Schmidt, Lucie, 2004. "The welfare implications of increasing disability insurance benefit generosity," Journal of Public Economics, Elsevier, vol. 88(12), pages 2487-2514, December.
    22. Marcello M. Estevão & Evridiki Tsounta, 2011. "Has the Great Recession Raised U.S. Structural Unemployment?," IMF Working Papers 11/105, International Monetary Fund.
    23. Mikhail Golosov & Aleh Tsyvinski, 2006. "Designing Optimal Disability Insurance: A Case for Asset Testing," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 257-279, April.
    24. 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.

    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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