Push and Pull: Disability Insurance, Regional Labor Markets, and Benefit Generosity in Canada and the United States

Kevin Milligan, Tammy Schirle

NBER Working Paper No. 23405
Issued in May 2017
NBER Program(s):Public Economics

Disability insurance take-up has expanded substantially in the past twenty years in the United States while shrinking in Canada. We empirically assess these trends by measuring the strength of the ‘push’ from weak labor markets versus the ‘pull’ of more generous benefits. Using an instrumental variables strategy comparing benefit changes across country, age, and year, we find that both benefits and regional wages matter. Simulations suggest that the upswing in disability insurance take-up in the United States would be reversed, dropping the caseload by one third, if benefits and wages had followed the growth path observed in Canada.

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Document Object Identifier (DOI): 10.3386/w23405

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