Working Paper: NBER ID: w1744
Authors: Jonathan S. Leonard
Abstract: The past three decades have witnessed a large and puzzling decline in labor force participation by prime-age males, and a correspondingly large increase in Social Security disability beneficiary roles.This paper reviews the analytical studies that have attempted to determine the causal links between disability, beneficiary status, and labor-force non-participation. Although disability is often thought of as a purely medically determined condition with no labor supply responsiveness to economic factors, models of Social Security disability beneficiary status as an economic decision have had some success in explaining both the growth of the program and the decline in labor force participation. These studies have, however, produced a wide range of estimates of labor supply elasticity, in part because of the difficulty of the underlying econometric problem of estimating the response to two (or more) potential income streams, only one of which is usually observed for any individual.
Keywords: Disability; Labor Supply; Social Security; Economics
JEL Codes: I13; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SSD program (C87) | labor supply (J20) |
| expected SSD benefits (H55) | SSD beneficiary status (H55) |
| SSD beneficiary status (H55) | labor force participation (J22) |
| 180% increase in SSD benefits (H55) | 1 percentage point increase in SSD beneficiaries (H55) |
| 10.5% increase in SSD benefits (H55) | 1 percentage point increase in SSD beneficiaries (H55) |
| growth in SSD beneficiary rates (H55) | decline in labor force participation rates among prime-age males (J49) |
| SSD program expansion (C87) | reduction in labor supply (J22) |