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Disability and Distress: The Effect of Disability Programs on Financial Outcomes

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  • Manasi Deshpande

    (University of Chicago, Department of Economics)

  • Tal Gross

    (Columbia University Mailman School of Public Health)

  • Yalun Su

    (University of Chicago)

Abstract

We provide the first evidence on the relationship between disability programs and markers of financial distress: bankruptcy, foreclosure, eviction, and home sale. Rates of these adverse financial events peak around the time of disability application and subsequently fall for both allowed and denied applicants. To estimate the causal effect of disability programs on these outcomes, we use variation induced by an age-based eligibility rule and find that disability allowance substantially reduces the likelihood of ad- verse financial events. Within three years of the decision, the likelihood of bankruptcy falls by 0.81 percentage point (30 percent), and the likelihood of foreclosure and home sale among homeowners falls by 1.7 percentage points (30 percent) and 2.5 percentage points (20 percent), respectively. We find suggestive evidence of reductions in eviction rates. Conversely, the likelihood of home purchases increases by 0.86 percentage point (20 percent) within three years. 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.

Suggested Citation

  • Manasi Deshpande & Tal Gross & Yalun Su, 2019. "Disability and Distress: The Effect of Disability Programs on Financial Outcomes," Working Papers 2019-020, Human Capital and Economic Opportunity Working Group.
  • Handle: RePEc:hka:wpaper:2019-020
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    Cited by:

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    2. Alexander Gelber & Timothy Moore & Zhuan Pei & Alexander Strand, 2023. "Disability Insurance Income Saves Lives," Journal of Political Economy, University of Chicago Press, vol. 131(11), pages 3156-3185.
    3. Aslim, Erkmen Giray & Fu, Wei & Tekin, Erdal & You, Shijun, 2023. "From Syringes to Dishes: Improving Food Security through Vaccination," IZA Discussion Papers 16009, Institute of Labor Economics (IZA).
    4. Katie Jajtner & Matt Messel & Jason Fletcher, 2023. "Social Security Disability Insurance and intergenerational economic mobility," Contemporary Economic Policy, Western Economic Association International, vol. 41(4), pages 575-593, October.
    5. Hamish Low & Luigi Pistaferri, 2020. "Disability Insurance: Theoretical Trade‐Offs and Empirical Evidence," Fiscal Studies, John Wiley & Sons, vol. 41(1), pages 129-164, March.
    6. C. Yiwei Zhang & Jeffrey Hemmeter & Judd B. Kessler & Robert D. Metcalfe & Robert Weathers, 2023. "Nudging Timely Wage Reporting: Field Experimental Evidence from the U.S. Supplemental Security Income Program," Management Science, INFORMS, vol. 69(3), pages 1341-1353, March.
    7. Montpetit, Sébastien & Beaureard, Pierre-Loup & Carrer, Luisa, 2024. "A welfare analysis of universal childcare: Lessons from a Canadian reform," CLEF Working Paper Series 73, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    8. Philip Armour & Melanie A. Zaber, 2020. "Does Student Loan Forgiveness Drive Disability Application?," NBER Working Papers 26787, National Bureau of Economic Research, Inc.
    9. Katie M. Jajtner & Sophie Mitra & Christine Fountain & Austin Nichols, 2020. "Rising Income Inequality Through a Disability Lens: Trends in the United States 1981–2018," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 151(1), pages 81-114, August.
    10. Swensen, Isaac D. & Urban, Carly, 2023. "Literature Review on the Effect of Physical and Mental Health on Financial Well-Being," IZA Policy Papers 198, Institute of Labor Economics (IZA).
    11. Colleen Carey & Nolan H. Miller & David Molitor, 2022. "Why Does Disability Increase During Recessions? Evidence from Medicare," NBER Working Papers 29988, National Bureau of Economic Research, Inc.
    12. Black, Bernard & French, Eric & McCauley, Jeremy & Song, Jae, 2024. "The effect of disability insurance receipt on mortality," Journal of Public Economics, Elsevier, vol. 229(C).
    13. Megan Henly, 2024. "Supplemental Security Income (SSI) Receipt and Access to Homeownership for People with Disabilities," Disabilities, MDPI, vol. 4(4), pages 1-12, December.
    14. Kenedi, Gustave, 2024. "Beyond the enrolment gap: financial barriers and high-achieving, low-income students' persistence in higher education," LSE Research Online Documents on Economics 126824, London School of Economics and Political Science, LSE Library.
    15. Youngsoo Jang, 2023. "Credit, Default, And Optimal Health Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 943-977, August.
    16. Fich, Eliezer M. & Nguyen, Tung & Petmezas, Dimitris, 2023. "The effects of terrorist attacks on inventor productivity and mobility," Research Policy, Elsevier, vol. 52(1).
    17. Manasi Deshpande & Lee M. Lockwood, 2022. "Beyond Health: Nonhealth Risk and the Value of Disability Insurance," Econometrica, Econometric Society, vol. 90(4), pages 1781-1810, July.
    18. Gustave Kenedi, 2024. "Beyond the enrolment gap: Financial barriers and high-achieving, low-income students' persistence in higher education," CEP Discussion Papers dp1987, Centre for Economic Performance, LSE.
    19. Joel Cuffey & Timothy K. M. Beatty & Elton Mykerezi, 2022. "Work Effort and Work Requirements for Food Assistance among U.S. Adults," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 294-317, January.
    20. Michelle M. Miller, 2022. "The impact of paid sick leave laws on consumer and business bankruptcies," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 19(4), pages 844-896, December.
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    More about this item

    Keywords

    disability; bankruptcy; eviction;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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