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How Does the Composition of Disability Insurance Applicants Change Across Business Cycles?

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  • Norma B. Coe
  • Matthew S. Rutledge

Abstract

Much as in previous recessions, the number of applications to public disability insurance programs increased sharply during the Great Recession. We find that the composition of applicants also changes across business cycles. For example, applicants during economic downturns, and especially during the Great Recession, are younger, better educated, higher income, and more likely to have recent work experience. However, we find only mixed evidence supporting the theory that the increase in applications in downturns is caused by healthier applicants who apply to disability programs only because they are unemployed. We formally decompose how the differences among the applicants across the business cycle – both from peak to trough and from trough to trough – contribute to the increased probability of applying for, and being awarded, benefits. We find that changing demographics and unemployment rates explain less than half of the increase in the application rate and only one quarter of the increase in the awards to applicants (the allowance rate) between the 2004-2006 expansion and the Great Recession. Further, these same factors predict a fall in the award rate (among eligible individuals), in contrast to the increase observed in the data. Together with the fact that there have been no programmatic changes in the disability programs in the 2000s, these results suggest there have been fundamental changes over the last decade in the way that people apply to disability and in the way these applications are evaluated that cannot be explained by observable differences.

Suggested Citation

  • Norma B. Coe & Matthew S. Rutledge, 2013. "How Does the Composition of Disability Insurance Applicants Change Across Business Cycles?," Working Papers, Center for Retirement Research at Boston College wp2013-5, Center for Retirement Research.
    • Handle: RePEc:crr:crrwps:wp2013-5
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    File URL: https://crr.bc.edu/working-papers/how-does-the-composition-of-disability-insurance-applicants-change-across-business-cycles/
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    Cited by:

    1. Nicole Maestas & Kathleen J. Mullen & Alexander Strand, 2015. "Disability Insurance and the Great Recession," American Economic Review, American Economic Association, vol. 105(5), pages 177-182, May.
    2. Sergi Jiménez-Martín & Arnau Juanmarti Mestres & Judit Vall Castelló, 2019. "Great Recession and disability insurance in Spain," Empirical Economics, Springer, vol. 56(5), pages 1623-1645, May.
    3. Sergi Jiménez-Martín & Arnau Juanmarti Mestres & Judit Vall-Castello, 2016. "Great Recession and Disability in Spain," Working Papers 896, Barcelona School of Economics.
    4. Y. Saks, 2017. "Better understanding the upward trend in the number of disability insurance claimants," Economic Review, National Bank of Belgium, issue ii, pages 55-68, september.
    5. Alicia H. Munnell & Matthew S. Rutledge, 2013. "The Effects of the Great Recession on the Retirement Security of Older Workers," The ANNALS of the American Academy of Political and Social Science, , vol. 650(1), pages 124-142, November.
    6. Lindner Stephan & Burdick Clark & Meseguer Javier, 2017. "Characteristics and Employment of Applicants for Social Security Disability Insurance over the Business Cycle," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(1), pages 1-17, February.
    7. Maestas, Nicole & Mullen, Kathleen J. & Strand, Alexander, 2021. "The effect of economic conditions on the disability insurance program: Evidence from the great recession," Journal of Public Economics, Elsevier, vol. 199(C).
    8. Bonnie O'Day & Crystal Blyler & Benjamin Fischer & Claire Gill & Todd Honeycutt & Rebecca Kleinman & Joseph Mastrianni & Eric Morris & Lisa Schottenfeld & Allison Thompkins & Allison Wishon-Siegwarth , "undated". "Improving Employment Outcomes for People with Psychiatric Disorders and Other Disabilities," Mathematica Policy Research Reports b4fe9ac23df949f09c8dab4a1, Mathematica Policy Research.

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