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The Impact of Disability Benefits on Labor Supply: Evidence for the VA’s Disability Compensation Program

Author

Listed:
  • David Autor

    (Massachusetts Institute of Technology and The National Bureau of Economic Research)

  • Mark Duggan

    (Stanford University and The National Bureau of Economic Research)

  • Kyle Greenberg

    (Massachusetts Institute of Technology and United States Military Academy)

  • David Lyle

    (United States Military Academy)

Abstract

We analyze the labor market effects of the U.S. Department of Veterans Affairs’ Disability Compensation (DC) program. The largely unstudied DC program currently provides income and health insurance to approximately four million veterans of military service who have service-connected disabilities. We study a unique policy change, the 2001 Agent Orange decision, which expanded eligibility for DC benefits to a broader set of covered conditions — in particular, type II diabetes — to Vietnam veterans who had served in-theater (with ‘Boots on the Ground’ or BOG). Notably, the Agent Orange policy excluded Vietnam era veterans who did not serve in-theatre (‘Not on Ground’ or NOG), thus allowing us to assess the causal effects of DC eligibility by contrasting the outcomes of BOG and NOG veterans. Our results indicate that the policy-induced increase in DC enrollment reduced labor force participation by 18 percentage points among BOG veterans who enrolled in the DC program as a result of the policy change. We also find evidence of program spillovers, with DC recipients significantly more likely to qualify for Social Security Disability Insurance benefits.

Suggested Citation

  • David Autor & Mark Duggan & Kyle Greenberg & David Lyle, 2014. "The Impact of Disability Benefits on Labor Supply: Evidence for the VA’s Disability Compensation Program," Discussion Papers 14-010, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:14-010
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    References listed on IDEAS

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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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