Induced Entry into the Social Security Disability Program: Using Past SGA Changes as a Natural Experiment

35 Pages Posted: 7 Sep 2012

See all articles by Nicole Maestas

Nicole Maestas

Harvard Medical School - Department of Health Care Policy

Kathleen J. Mullen

RAND Corporation

Gema Zamarro

University of Arkansas - Department of Education Reform; Center for Economic and Social Research (CESR)

Date Written: August 31, 2012

Abstract

The number of American adults receiving benefits from the Social Security Disability Insurance (SSDI) program has increased dramatically over the past several decades. A proposed solution to rising program costs is to change program rules to encourage fully or partially recovered SSDI beneficiaries to return to work. One such option is a benefit offset policy, which would reduce SSDI benefits by $1 for every $2 of earned income. While a benefit offset could generate savings from increased labor supply and program exit among current beneficiaries, it could also generate unintended costs if the more generous work rules induce significant numbers of working individuals to apply for benefits. In this paper we examine how past changes in a closely related program parameter, the Substantial Gainful Activity (SGA) threshold, have affected SSDI applications. We exploit changes over time and across states in real relative SGA levels, relative to local average wages. We find that a 7 percentage point (30%) increase in the real relative SGA (on par with the 1999 increase from $500 to $700 per month) was associated with a 4.7% increase in applications.

Keywords: Social Security Disability Insurance, benefit offset policy, Substantial Gainful Activity

Suggested Citation

Maestas, Nicole and Mullen, Kathleen J. and Zamarro, Gema, Induced Entry into the Social Security Disability Program: Using Past SGA Changes as a Natural Experiment (August 31, 2012). Michigan Retirement Research Center Research Paper No. 2012-262. Available at SSRN: https://ssrn.com/abstract=2143233 or http://dx.doi.org/10.2139/ssrn.2143233

Nicole Maestas (Contact Author)

Harvard Medical School - Department of Health Care Policy ( email )

180 Longwood Avenue
Boston, MA 02115
United States

Kathleen J. Mullen

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States
310-393-0411 x6265 (Phone)
310-260-8156 (Fax)

HOME PAGE: http://works.bepress.com/kathleen_mullen

Gema Zamarro

University of Arkansas - Department of Education Reform ( email )

201 Graduate Education Building
Fayetteville, AR 72701
United States

Center for Economic and Social Research (CESR) ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

HOME PAGE: http://works.bepress.com/gema_zamarro/

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