Papers

Long-Run Drivers of Disability Insurance Rates

John N. Friedman, Ithai Lurie, Magne Mogstad, Raj Chetty

NBER Disability Research Center Paper No. NB 16-01
Issued in September 2016

Understanding the causes of the rise in disability rolls lies at the heart of policies concerned with the interaction of working life, family well-being, and a country’s social safety net. To explore the long-run drivers of disability insurance (DI) receipt, we use administrative tax data that allows us to link young adults (ages 24-34) to their parents. Our findings are threefold. First, DI receipt is strongly linked to the income of the recipient’s parents, with rates for young adults from the poorest families roughly six times higher than those from the richest families. Second, children from low income families display sharply varying probabilities of receiving DI depending on the place where they grew up, while those from rich families show no similar differences.

Suggestive evidence indicates that roughly 50% of these place-based differences are causal. Third, places where poor children grow up to have the highest rates of DI receipt tend to be “good” areas based on many standard characteristics, including lower inequality, lower segregation, higher school quality, and higher social capital.

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