TY  - JOUR
AU  - Autor,David H.
AU  - Duggan,Mark G.
TI  - The Rise in Disability Recipiency and the Decline in Unemployment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8336
PY  - 2001
Y2  - June 2001
UR  - http://www.nber.org/papers/w8336
L1  - http://www.nber.org/papers/w8336.pdf
N1  - Author contact info:
David Autor
Department of Economics
MIT, E52-371
50 Memorial Drive
Cambridge, MA 02142-1347
Tel: 617/258-7698
Fax: 617/253-1330
E-Mail: dautor@mit.edu

Mark Duggan
The Wharton School
University of Pennsylvania
1452 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
Tel: 215-898-0928
Fax: 215-898-7635
E-Mail: mduggan@wharton.upenn.edu
AB  - Between 1984 and 2000, the share of non-elderly adults receiving benefits from the Social Security Disability Insurance (DI) and Supplemental Security Income (SSI) programs rose from 3.1 to 5.3 percent. We trace this growth to reduced screening stringency and, due to the interaction between growing wage inequality and a progressive benefits formula, a rising earnings replacement rate. We explore the implications of these changes for the level of labor force participation among the less skilled and their employment responses to adverse employment shocks. Following program liberalization in 1984, DI application and recipiency rates became two to three times as responsive to plausibly exogenous labor demand shocks. Contemporaneously, male and female high school dropouts became increasingly likely to exit the labor force rather than enter unemployment in the event of an adverse shock. The liberalization of the disability program appears to explain both facts. Accounting for the role of disability in inducing labor force exit among the low-skilled unemployed, we calculate that the U.S. unemployment rate would be two-thirds of a percentage point higher at present were it not for the liberalized disability system.
ER  -