The Effect of the Supplemental Security Income Children's Program on Parental Labor Supply and Long-Term Outcomes of Enrolled Children

Manasi Deshpande

NBER Disability Research Center Paper No. NB 13-04
Issued in September 2013

I estimate the effect of removing children with disabilities from the Supplemental Security Income (SSI) program on parental earnings and household income. Using administrative data from the Social Security Administration, I implement both a regression discontinuity design and a difference-in-differences design based on changes in the budget for medical reviews, which increase the likelihood of removal from SSI. I find that a loss of $1,000 in the child’s SSI payment increases parental earnings—exclusively on the intensive margin—by $700-$1,400, indicating that parents fully offset the SSI loss with increased earnings. The loss of the child’s SSI payment also discourages parents and siblings from applying for disability insurance. In addition, I find evidence that family members often apply for disability insurance at the same time, which suggests the importance of household-level shocks in the decision to apply. Using the unique institutional context of the SSI program, I provide suggestive evidence that the large response in parental earnings is driven mostly by an income effect rather than a substitution effect.