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

Author

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  • David Wiczer

    (FRB St. Louis)

  • Amanda Michaud

    (Indiana University)

Abstract

In recent decades, Social Security Disability Insurance (SSDI) claims have risen rapidly. We evaluate the importance of changing macroeconomic conditions in shaping this trend. Our quantitative framework considers that economic conditions interact with individuals' health status in their decisions to apply for SSDI. Crucially, these factors are correlated through the nature of work: multiple sectors differentially expose workers to health and economic risks. Decomposing factors driving SSDI growth in a calibrated model, we find the deteriorating economic conditions and concentration of health risks account for about half of the increase in SSDI claims predicted by the model, about a third overall.

Suggested Citation

  • David Wiczer & Amanda Michaud, 2017. "The Disability Option: Labor Market Dynamics with Macroeconomic and Health Risks," 2017 Meeting Papers 1459, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:1459
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    File URL: https://economicdynamics.org/meetpapers/2017/paper_1459.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. 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.
    3. 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.
    4. 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.
    5. 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.
    6. Kitao, Sagiri, 2014. "A life-cycle model of unemployment and disability insurance," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 1-18.
    7. Michaud, Amanda M. & Wiczer, David, 2014. "Occupational hazards and social disability insurance," Working Papers 2014-24, Federal Reserve Bank of St. Louis, revised 03 Oct 2016.
    Full references (including those not matched with items on IDEAS)

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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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