NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Impact of Disability Benefits on Labor Supply: Evidence from the VA's Disability Compensation Program

David H. Autor, Mark Duggan, Kyle Greenberg, David S. Lyle

NBER Working Paper No. 21144
Issued in May 2015
NBER Program(s):Aging, Labor Studies, Public Economics

Combining administrative data from the U.S. Army, Department of Veterans Affairs (VA) and the U.S. Social Security Administration, we analyze the effect of the VA’s Disability Compensation (DC) program on veterans’ labor force participation and earnings. The largely unstudied Disability Compensation program currently provides income and health insurance to almost four million veterans of military service who suffer service-connected disabilities. We study a unique policy change, the 2001 Agent Orange decision, which expanded DC eligibility for Vietnam veterans who had served in-theatre to a broader set of conditions such as type 2 diabetes. Exploiting the fact that the Agent Orange policy excluded Vietnam era veterans who did not serve in-theatre, we assess the causal effects of DC eligibility by contrasting the outcomes of these two Vietnam-era veteran groups. The Agent Orange policy catalyzed a sharp increase in DC enrollment among veterans who served in-theatre, raising the share receiving benefits by five percentage points over five years. Disability ratings and payments rose rapidly among those newly enrolled, with average annual non-taxed federal transfer payments increasing to $17K within five years. We estimate that benefits receipt reduced labor force participation by 18 percentage points among veterans enrolled due to the policy, though measured income net of transfer benefits rose on average. Consistent with the relatively advanced age and diminished health of Vietnam era veterans in this period, we estimate labor force participation elasticities that are somewhat higher than among the general population.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21144

Published: David H. Autor & Mark Duggan & Kyle Greenberg & David S. Lyle, 2016. "The Impact of Disability Benefits on Labor Supply: Evidence from the VA's Disability Compensation Program," American Economic Journal: Applied Economics, vol 8(3), pages 31-68. citation courtesy of

Users who downloaded this paper also downloaded* these:
Coile, Duggan, and Guo w20932 Veterans’ Labor Force Participation: What Role Does the VA’s Disability Compensation Program Play?
Caliendo, Dvorkin, and Parro w21149 The Impact of Trade on Labor Market Dynamics
Azoulay, Bonatti, and Krieger w21146 The Career Effects of Scandal: Evidence from Scientific Retractions
Conger and Turner w21135 The Impact of Tuition Increases on Undocumented College Students' Attainment
Bagaria, Petrongolo, and Van Reenen w21163 Can helping the sick hurt the able? Incentives, information and disruption in a disability-related welfare reform
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us