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Does Disability Insurance Receipt Discourage Work? Using Examiner Assignment to Estimate Causal Effects of SSDI Receipt
by Nicole Maestas, Kathleen Mullen and Alexander Strand
WP 2010-241
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- Determining the impact of Social Security Disability Insurance on the employment and earnings of beneficiaries has been difficult since unobserved severity is likely positively correlated with DI receipt.
- We take advantage of a unique workload management database to match SSDI applicants to disability examiners, and use systematic variation in allowance rates by disability examiner that is uncorrelated with individual applicants’ severity in order to estimate the labor supply effects of SSDI.
- We find that, among the estimated 23% of applicants on the margin of program entry, employment would be on average 28 percentage points greater in the absence of SSDI benefit receipt. The applicant’s likelihood of engaging in substantial gainful activity as defined by the SSDI program would be on average 19 percentage points higher, and he or she would earn on average $3,781 more per year in the absence of SSDI benefit receipt.
- Importantly, the disincentive effect of SSDI on employment varies across individuals with impairments of different degrees of unobservable severity, ranging from no effect for those with more severe impairments to 50 percentage points for those with less severe impairments.
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