The Effect of Disability Insurance Receipt on Labor Supply

48 Pages Posted: 30 Oct 2009 Last revised: 14 Jul 2011

See all articles by Eric French

Eric French

Department of Economics; Institute for Fiscal Studies (IFS)

Jae Song

U.S. Social Security Administration

Date Written: July 1, 2011

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.

Keywords: Disability Insurance, Labor Supply

JEL Classification: H21, J22

Suggested Citation

French, Eric and Song, Jae, The Effect of Disability Insurance Receipt on Labor Supply (July 1, 2011). FRB of Chicago Working Paper No. 2009-05, Available at SSRN: https://ssrn.com/abstract=1496402 or http://dx.doi.org/10.2139/ssrn.1496402

Eric French (Contact Author)

Department of Economics ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Jae Song

U.S. Social Security Administration ( email )

Washington, DC 20254
United States
202-358-6403 (Phone)
202-358-6192 (Fax)

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