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The Effect of Disability Insurance Receipt on Labor Supply

Year: 2011

Type: article

Abstract: This paper estimates the effect of Disability Insurance receipt on labor supply. We find that benefit receipt reduces labor force participation by 26 percentage points three years after a disability determination decision, although the reduction is smaller for those over age 55, college graduates, and those with mental illness. Estimates are not sensitive to accounting for the fact that those allowed benefits are different than those who are denied. However, estimates are sensitive to accounting for the fact that many individuals who are initially denied are later allowed. The participation elasticity with respect to the after-tax wage is 1.5.

Source: American Economic Journal Economic Policy

DOI: 10.1257/pol.6.2.291

Authors: Eric French, Jae Song

Institutions: University College London, Federal Reserve Bank of Chicago, United States Social Security Administration

Language: English

Topic: Retirement, Disability, and Employment

Subfield: Demography

Field: Social Sciences

Domain: Social Sciences

SDGs: Decent work and economic growth, No poverty, Reduced inequalities

Open Access status: green

Funders: U.S. Social Security Administration, Economic and Social Research Council