Working Paper | HBS Working Paper Series | 2013

Asset Accumulation and Labor Force Participation of Disability Insurance Applicants

by Pian Shu

Abstract

Using panel data from the RAND Health and Retirement Study, I show that rejected applicants for Social Security Disability Insurance (SSDI) possess significantly more assets immediately prior to their application and exhibit lower labor force attachment than accepted applicants. These findings are consistent with the theoretical prediction that disability insurance may encourage individuals to save more in the present and plan to apply for disability benefits in the future, regardless of the state of their future health. Because the current empirical literature does not account for this intertemporal channel, it may underestimate the total work disincentive effect of SSDI.

Keywords: Disability insurance; asset accumulation; labor force participation; Assets; Behavior; Employment; Insurance; Insurance Industry; United States;

Citation:

Shu, Pian. "Asset Accumulation and Labor Force Participation of Disability Insurance Applicants." Harvard Business School Working Paper, No. 14-008, July 2013.