Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants

54 Pages Posted: 12 Jan 2015

See all articles by David H. Autor

David H. Autor

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Nicole Maestas

Harvard Medical School - Department of Health Care Policy

Kathleen J. Mullen

RAND Corporation

Alexander Strand

Social Security Administration

Multiple version iconThere are 4 versions of this paper

Date Written: January 2015

Abstract

This paper measures the causal effect of time out of the labor force on subsequent employment of Social Security Disability Insurance (SSDI) applicants and distinguishes it from the discouragement effect of receiving disability benefits. Using a unique Social Security Administration workload database to identify exogenous variation in decision times induced by differences in processing speed among disability examiners to whom applicants are randomly assigned, we find that longer processing times reduce the employment and earnings of SSDI applicants for multiple years following application, with the effects concentrated among applicants awarded benefits during their initial application. A one standard deviation (2.1 month) increase in initial processing time reduces long-run “substantial gainful activity” rates by 0.36 percentage points (3.5%) and long-run annual earnings by $178 (5.1%). Because applicants initially denied benefits spend on average more than 15 additional months appealing their denials, previous estimates of the benefit receipt effect are confounded with the effect of delays on subsequent employment. Accounting separately for these channels, we find that the receipt effect is at least 50% larger than previously estimated. Combining the delay and benefits receipt channels reveals that the SSDI application process reduces subsequent employment of applicants on the margin of award by twice as much as prior literature suggests.

Suggested Citation

Autor, David H. and Maestas, Nicole and Mullen, Kathleen J. and Strand, Alexander, Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants (January 2015). NBER Working Paper No. w20840. Available at SSRN: https://ssrn.com/abstract=2548359

David H. Autor (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Nicole Maestas

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

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Kathleen J. Mullen

RAND Corporation ( email )

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

Alexander Strand

Social Security Administration ( email )

Washington, DC
United States

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