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Spousal Labor Supply Responses to Government Programs: Evidence from the Disability Insurance Program

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  • Susan E. Chen

    (University of Alabama, Tuscaloosa)

Abstract

Disability is a permanent unexpected shock to labor supply which according to the theory of the added worker effect should induce a large spousal labor supply response. The Disability Insurance (DI) program is designed to mitigate the income lost due to disability. To the extent that it does this, it can crowd out the spousal labor supply response predicted by the added worker effect theory. Using a unique data that matches administrative data combining worker’s earnings histories and disability insurance applications, this study finds that DI crowds out spousal labor force participation by 6 percent and the displacement spans multiple years. The estimated crowd-out effects are also larger for younger wife cohorts and cohorts with particular types of impairments such as musculoskeletal disease.

Suggested Citation

  • Susan E. Chen, 2012. "Spousal Labor Supply Responses to Government Programs: Evidence from the Disability Insurance Program," Working Papers wp261, University of Michigan, Michigan Retirement Research Center.
    • Handle: RePEc:mrr:papers:wp261
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    References listed on IDEAS

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    7. David H. Autor & Mark G. Duggan, 2006. "The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 71-96, Summer.
    8. John Bound & Richard V Burkhauser & Austin Nichols, 2003. "Tracking The Household Income Of Ssdi And Ssi Applicants," Research in Labor Economics, in: Worker Well-Being and Public Policy, pages 113-158, Emerald Group Publishing Limited.
    9. Till von Wachter & Jae Song & Joyce Manchester, 2011. "Trends in Employment and Earnings of Allowed and Rejected Applicants to the Social Security Disability Insurance Program," American Economic Review, American Economic Association, vol. 101(7), pages 3308-3329, December.
    10. Cullen, Julie Berry & Gruber, Jonathan, 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 546-572, July.
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    Cited by:

    1. Annarita Macchioni Giaquinto & Andrew M. Jones & Nigel Rice & Francesca Zantomio, 2022. "Labor supply and informal care responses to health shocks within couples: Evidence from the UK," Health Economics, John Wiley & Sons, Ltd., vol. 31(12), pages 2700-2720, December.
    2. Nicholas A. Jolly & Nikolaos Theodoropoulos, 2023. "Health shocks and spousal labor supply: an international perspective," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(2), pages 973-1004, April.
    3. Norma Coe & Stephan Lindner & Kendrew Wong & April Wu, 2014. "How do people with disabilities cope while waiting for disability insurance benefits?," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-27, December.
    4. Costa-Font, Joan & Vilaplana-Prieto, Cristina, 2023. "Caregiving subsidies and spousal early retirement intentions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 22(4), pages 550-589, October.
    5. Kadir Atalay & Garry F. Barrett & Peter Siminski, 2019. "Pension incentives and the joint retirement of couples: evidence from two natural experiments," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(3), pages 735-767, July.
    6. Rennane, Stephanie, 2020. "A double safety net? Understanding interactions between disability benefits, formal assistance, and family support," Journal of Health Economics, Elsevier, vol. 69(C).
    7. Boyle, Melissa A. & Lahey, Joanna N., 2016. "Spousal labor market effects from government health insurance: Evidence from a veterans affairs expansion," Journal of Health Economics, Elsevier, vol. 45(C), pages 63-76.
    8. Kauer, Lukas, 2014. "The Effect of Cutting Disability Insurance Benefits on Labor Supply in Households," Economics Working Paper Series 1401, University of St. Gallen, School of Economics and Political Science.

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