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

Author

Listed:
  • Autor, David

    (MIT)

  • Maestas, Nicole

    (Harvard Medical School)

  • Mullen, Kathleen

    (University of Oregon)

  • Strand, Alexander

    (U.S. Social Security Administration)

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 & Maestas, Nicole & Mullen, Kathleen & Strand, Alexander, 2015. "Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants," IZA Discussion Papers 8788, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8788
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    References listed on IDEAS

    as
    1. Chen, Susan & van der Klaauw, Wilbert, 2008. "The work disincentive effects of the disability insurance program in the 1990s," Journal of Econometrics, Elsevier, vol. 142(2), pages 757-784, February.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    disability; labor force participation; transfer programs; social security;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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