How Disability Benefits in Early Life Affect Long-Term Outcomes
The debate over the Supplemental Security Income program for children reflects a key tradeoff in welfare programs: transfers to disadvantaged households could promote children's human capital development by increasing household resources, but conditioning those transfers on child health and family income could potentially discourage human capital development by creating perverse incentives. In this paper, I use two regression discontinuity designs (RDD) paired with Social Security administrative data to estimate the net effect of receiving SSI in childhood on adult earnings and to separately identify the household resources channel and perverse incentives channels. Using the first RDD, I find that removing children from SSI has a statistically insignificant net effect on child earnings in adulthood. Using the second RDD and a novel data linkage procedure to identify younger siblings in SSA administrative data, I find that removing youth from SSI at the age of 18 reduces the adult earnings of their younger siblings by about $5,000 annually. This finding suggests that SSI's household resources channel has a large positive effect on children's human capital development. I develop a decomposition procedure to determine the relative contributions of the income transfer and the perverse incentives channels to the net effect of SSI.
I thank Linda Martin, Samuel Foster, William Lancaster, and Obie Blackmon of the Office of Data Development (Office of Research, Evaluation, and Statistics) at the Social Security Administration for providing data for this project. David Price provided helpful suggestions on the sibling linkage procedure. I thank Alessandra Voena and Jiada Ye for helpful comments. I thank Jason Weitze and Jiada Ye for excellent research assistance. I am grateful to the Ronzetti Initiative for the Study of Labor Markets at the Becker-Friedman Institute for Financial support.
This research was supported by the U.S. Social Security Administration through grant RDR18000003 from
the US Social Security Administration (SSA) funded as part of the Retirement and Disability Research
Consortium. The findings and conclusions expressed are solely those of the author(s) and do not represent
the views of SSA, any agency of the Federal Government, or the NBER.