Disability and Distress: The Effect of Disability Programs on Financial Outcomes
American Economic Journal: Applied Economics
vol. 13,
no. 2, April 2021
(pp. 151-78)
(Complimentary)
Abstract
What is the relationship between disability programs and financial distress? We provide the first evidence on this relationship using several markers of financial distress: bankruptcy, foreclosure, eviction, and home sale. Rates of these adverse financial events peak around the time of disability application. Using variation induced by an age-based eligibility rule, we find that disability allowance reduces the likelihood of bankruptcy by 20 percent, foreclosure by 33 percent, and home sale by 15 percent. We present evidence that these changes reflect true reductions in financial distress. Considering these extreme events increases the optimal disability benefit amount and suggests a shorter optimal waiting time between application and benefit receipt.Citation
Deshpande, Manasi, Tal Gross, and Yalun Su. 2021. "Disability and Distress: The Effect of Disability Programs on Financial Outcomes." American Economic Journal: Applied Economics, 13 (2): 151-78. DOI: 10.1257/app.20190709Additional Materials
JEL Classification
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- H55 Social Security and Public Pensions
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
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