(UM10-01) - The Labor Supply Effects of Disability Insurance Work Disincentives: Evidence from Administrative Data
Nicole Maestas and Jae Song
The Social Security DI program has long been thought to impose strong work disincentives. Nevertheless, its causal effect on labor supply has been difficult to estimate. Using a quasi-experimental research design that exploits the fact that DI benefits are payable only until full retirement age (FRA) (at which point they are converted to retired worker benefits and the implicit very high tax rate on earnings is abruptly relaxed), we propose to use SSA administrative data to examine the labor force participation rates of DI recipients with different medical conditions before and after the abrupt relaxation of work disincentives at FRA.