Applications to Social Security Disability Insurance

Till von Wachter

NBER Retirement Research Center Paper No. NB 10-13
Issued in September 2010

While a growing literature confirms that applications to Social Security Disability Insurance (DI) increase when conditions in the labor market worsen, less is known about how such conditions interact with characteristics of the screening process. Similarly, little is known about the effect of labor market conditions on the screening process itself. This project analyzes the effect of predicted changes in county employment rates on the application pattern and adjudication process of DI. The findings suggest that while employment declines raise DI application rates and lower labor force participation rates, the effect is smaller in the early 2000s than in the early 1990s. It also appears that the fraction of applications allowed at the level of Disability Determination Service (DDS) office allowance rates experience a substantial decline when applications rise due to a decline in employment. At the same time, the duration of screening of DI applications at the DDS-level rises somewhat. This implies that part of the applicants induced to apply by economic shocks are screened out during the initial stages of the adjudication process, and ensuing congestion appears weak. There is also some evidence that DDS offices with higher average screening duration receive fewer applications when local employment drops. Yet, potential applicants so dissuaded from applying after an employment decline do not appear to return to the labor force.

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