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The Disability Option: Labor Market Dynamics with Macroeconomic and Health Risks

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  • Amanda Michaud
  • David Wiczer

Abstract

We evaluate the contribution of changing macroeconomic conditions and demographics to the increase in Social Security Disability Insurance (SSDI) over recent decades. Within our quantitative framework, multiple sectors differentially expose workers to health and economic risks, both of which affect individuals' decisions to apply for SSDI. Over the transition, falling wages at the bottom of the distribution increased awards by 27% in the 1980s and 90s and aging demographics rose in importance thereafter. The model also implies two-thirds of the decline in working-age male employment from 1985 to 2013, three-fourths of which eventually goes on SSDI.

Suggested Citation

  • Amanda Michaud & David Wiczer, 2018. "The Disability Option: Labor Market Dynamics with Macroeconomic and Health Risks," Department of Economics Working Papers 18-12, Stony Brook University, Department of Economics.
  • Handle: RePEc:nys:sunysb:18-12
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    File URL: https://www.stonybrook.edu/commcms/economics/research/papers/2018/DIOption_1812.pdf
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    References listed on IDEAS

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    1. repec:crr:issbrf:ib2013-11 is not listed on IDEAS
    2. Dan Black & Kermit Daniel & Seth Sanders, 2002. "The Impact of Economic Conditions on Participation in Disability Programs: Evidence from the Coal Boom and Bust," American Economic Review, American Economic Association, vol. 92(1), pages 27-50, March.
    3. Andreas I. Mueller & Jesse Rothstein & Till M. von Wachter, 2016. "Unemployment Insurance and Disability Insurance in the Great Recession," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 445-475.
    4. Benitez-Silva, Hugo & Buchinsky, Moshe & Chan, Hiu Man & Rust, John & Sheidvasser, Sofia, 1999. "An empirical analysis of the social security disability application, appeal, and award process," Labour Economics, Elsevier, vol. 6(2), pages 147-178, June.
    5. Kitao, Sagiri, 2014. "A life-cycle model of unemployment and disability insurance," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 1-18.
    6. repec:eee:moneco:v:96:y:2018:i:c:p:77-92 is not listed on IDEAS
    7. Michaud, Amanda & Wiczer, David, 2018. "Occupational hazards and social disability insurance," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 77-92.
    8. David H. Autor & Mark G. Duggan, 2006. "The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 71-96, Summer.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Disability Option: Labor Market Dynamics with Macroeconomic and Health Risks
      by Christian Zimmermann in NEP-DGE blog on 2019-01-31 02:42:18

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    Cited by:

    1. Michaud, Amanda M. & Nelson, Jaeger & Wiczer, David, 2016. "Vocational Considerations and Trends in Social Security Disability," Working Papers 2016-18, Federal Reserve Bank of St. Louis.

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