Labor Supply under Disability Insurance

Abstract

There has been a significant recent growth in the Social Security Administration's Disability Insurance (DI) program, both in the number of covered workers under the program and in the amount of monthly benefits, One possible factor causing this growth has been labor supply disincentives under the pro- gram. The labor supply decision by an individual involves the effect of the disability benefit structure (potential benefits) on labor force participation. Probit estimates from the 1969 original sample of the Longitudinal Retirement History Study (LRHS) indicated an elasticity of participation with respect to benefits of -0031 for married men aged 58-63, and -.023 for all men of the same age group. The magnitude of these estimates are much less than those found by authors such as Parsons, and suggest relatively insignificant efficiency losses in terns of reduced work effort.