Social Security Disability Insurance: Time for Fundamental Change

Burkhauser, Richard V.; Daly, Mary C.

doi:10.1002/pam.21618

Cited by 51 publications

(21 citation statements)

References 12 publications

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“…DI rate continues to rise and is projected to exceed 7 percent by 2018 (Burkhauser and Daly, 2012). Incidence of DI receipt (%) 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 Norway 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 United States Notes: U.S. trends based on Autor and Duggan (2006) In both countries, the expansion of the DI rolls in recent decades appears to be driven by the liberalization of the screening process, which led to a rapid increase in the share of DI recipients suffering from difficult-toverify disorders such as mental illness and musculoskeletal disease.…”

Section: Institutional Backgroundmentioning

confidence: 99%

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Family Welfare Cultures

2013

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Strong intergenerational correlations in various types of welfare use have fueled a long-standing debate over whether welfare receipt in one generation causes welfare participation in the next generation. Some claim a causal relationship in welfare receipt across generations has created a culture in which welfare use reinforces itself through the family. Others argue the determinants of poverty or poor health are correlated across generations, so that children's welfare participation is associated with, but not caused by, parental welfare receipt. However, there is little empirical evidence to sort out these claims. In this paper, we investigate the existence and importance of family welfare cultures in the context of Norway's disability insurance (DI) system. To overcome the challenge of correlated unobservables across generations, we take advantage of random assignment of judges to DI applicants whose cases are initially denied. Some appeal judges are systematically more lenient, which leads to random variation in the probability a parent will be allowed DI. Using this exogenous variation, we find strong evidence that welfare receipt in one generation causes welfare participation in the next generation: when a parent is allowed DI, their adult child's participation over the next five years increases by 6 percentage points. This effect grows over time, rising to 12 percentage points after ten years. While these findings are specific to our setting, they serve to highlight that welfare reforms can have long-lasting effects on program participation, since any original effect on the current generation could be reinforced by changing the participation behavior of their children as well. The detailed nature of our data allows us to compare the intergenerational transmission with spillover effects in other networks and to explore mechanisms. Our findings point to a special link between parents and their children, with little impact due to close neighbors' DI participation. We find suggestive evidence that what may change as a result of a parent being allowed DI is their children's beliefs about the efficacy of trying to get on to the DI program or their attitudes about DI participation and its stigma.

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Section: Institutional Backgroundmentioning

confidence: 99%

“…Many have argued these increases are fiscally unsustainable, especially as current DI recipients are younger and have longer life expectancies on average compared to previous cohorts of recipients (e.g., Autor and Duggan, 2006;Burkhauser and Daly, 2012).…”

Section: Introductionmentioning

confidence: 99%

Family Welfare Cultures

2013

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“…From 1961 to 2012, the rate of receipt increased from 2.2 to 10.4 percent in Norway and from 0.8 to 5.3 percent in the U.S. While Norway's rate has leveled off at about 10 percent in recent years, the U.S. DI rate continues to rise and is projected to exceed 7 percent by 2018 (Burkhauser and Daly, 2012).…”

Section: Norwaymentioning

confidence: 99%

“…Many have argued that these increases are fiscally unsustainable, especially as current DI recipients are younger and have longer life expectancies on average compared to previous cohorts of recipients (e.g., Autor and Duggan, 2006;Burkhauser and Daly, 2012).…”

mentioning

confidence: 99%

Family Welfare Cultures *

Dahl

Kostøl

Mogstad

2014

The Quarterly Journal of Economics

241

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Strong intergenerational correlations in various types of welfare use have fueled a long standing debate over whether welfare dependency in one generation causes welfare dependency in the next generation.Some claim a culture has developed in which welfare use reinforces itself through the family, because parents on welfare provide information about the program to their children, reduce the stigma of participation, or invest less in child development. Others argue the determinants of poverty or poor health are correlated across generations, so that children's welfare participation is associated with, but not caused by, parental welfare use. However, there is little empirical evidence to sort out these claims. In this paper, we investigate the existence and importance of family welfare cultures in the context of Norway's disability insurance (DI) system. To overcome the challenge of correlated unobservables across generations, we take advantage of random assignment of judges to DI applicants whose cases are initially denied. Some appeal judges are systematically more lenient, which leads to random variation in the probability a parent will be allowed DI.Using this exogenous variation, we find strong evidence that welfare use in one generation causes welfare use in the next generation: when a parent is allowed DI because of a lenient judge, their adult child's participation over the next five years increases by 6 percentage points. This effect grows over time, rising to 12 percentage points after ten years. Using our estimates, we simulate the total reduction in DI participation from a policy which makes the screening process more stringent; the intergenerational link amplifies the direct effect on parents at the margin of program entry, leading to long-run participation rate and program costs which are substantially lower than would otherwise be expected. The detailed nature of our data allows us to explore the mechanisms behind the causal intergenerational relationship; we find suggestive evidence against stigma and parental investments and in favor of children learning from a parent's experience.

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“…Also, benefit receipt rates have tended to increase more in times of economic recessions, and to remain on structurally higher levels afterwards. The institutional features of programmes themselves, such as the length of awards, the amounts receivable and the administrative rigour in assessing cases, have been identified as the main drivers of the observed growth and fluctuations in benefit rolls both in Europe and the United States (Burkhauser & Daly 2012). Currently, policy attention in the area of disability has shifted from the original aim of ensuring an earnings replacement to disabled individuals, thus protecting them from the risk of income poverty.…”

Section: Work Disability and Benefit Receiptthe Issues At Stakementioning

confidence: 99%