Accounting for Disability Insurance in the Dynamic Relationship Between Disability Onset and Earnings

Publication Date: November 2010

Publisher: Center for Retirement Research at Boston College

Author(s): Perry Singleton

Research Area: Economics

Keywords: disability insurance; SSA; retirement

Type: Report

Coverage: United States

Abstract:

The onset of a work-limiting disability coincides with an immediate decline in earnings with little recovery. This study examines whether this relationship is attributable to the labor disincentives of disability insurance. The data come from the Survey of Income and Program Participation linked to administrative data from the Social Security Administration. The analysis suggests that disability insurance accounts for little of the initial drop in earnings at the
time of disability onset, but its effect may increase as time since disability onset elapses. The results highlight the advantages of immediate, though temporary disability benefits.