Working Paper: NBER ID: w25338
Authors: Nicole Maestas; Kathleen J. Mullen; Alexander Strand
Abstract: We examine the effect of cyclical job displacement during the Great Recession on the Social Security Disability Insurance (SSDI) program. Exploiting variation in the severity and timing of the recession across states, we estimate the effect of unemployment on SSDI applications and awards. We find the Great Recession induced nearly one million SSDI applications that otherwise would not have been filed, of which 41.8 percent were awarded benefits, resulting in over 400,000 new beneficiaries who made up 8.9 percent of all SSDI entrants between 2008-2012. More than one-half of the recession-induced awards were made on appeal. The induced applicants had less severe impairments than the average applicant. Only 9 percent had the most severe, automatically-qualifying impairments, 33 percent had functional impairments and no transferable skills, and the rest were denied for having insufficiently severe impairments and/or transferable skills. Our estimates imply the Great Recession increased claims processing costs by $2.960 billion during 2008-2012, and SSDI benefit obligations by $55.730 billion in present value, or $97.365 billion including both SSDI and Medicare benefits.
Keywords: Disability Insurance; Great Recession; Unemployment; SSDI
JEL Codes: H51; H53; H55; J14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SSDI applications (H55) | SSDI awards (H55) |
| SSDI applications (H55) | new beneficiaries (H55) |
| Great Recession (G01) | SSDI processing costs (H53) |
| Great Recession (G01) | SSDI benefit obligations (H55) |
| SSDI applications (H55) | SSDI processing costs (H53) |
| SSDI applications (H55) | SSDI awards at appellate level (H55) |
| All new beneficiaries (H55) | SSDI awards at appellate level (H55) |
| Great Recession (G01) | average claim duration for induced beneficiaries (J65) |
| induced applicants (J68) | severity of impairments (I12) |
| Great Recession (G01) | SSDI applications (H55) |