Why Does Disability Increase During Recessions? Evidence from Medicare
Social Security Disability Insurance (DI) awards rise in recessions, especially for workers over age 50. We use Medicare data to investigate how health, entry costs, and age-based DI eligibility rules shape this pattern. Recession-induced entrants have lower medical spending and mortality than typical recipients. The entry response to unemployment jumps 2–4 fold at ages 50 and 55, when eligibility rules relax. Using these age-based discontinuities as instruments, we find no difference in marginal entrants’ health across unemployment levels. These findings demonstrate that DI’s age-based eligibility rules play a major role in driving cyclical entry, while health shocks do not.
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