Explaining Geographic Di erences in Young Disability Insurance Rates

John N. Friedman, Maxwell Kellogg, Ithai Lurie, Magne Mogstad

NBER Disability Research Center Paper No. NB 18-02
Issued in September 2018

Although much research has explored the rise in young disability insurance (DI) receipt, there has been much less work explaining the large geographic di erences in DI rates across cities and states. We explore the drivers of this heterogeneity using administrative tax data that allows us to link young adults (age 24-34) to their parents. Our ndings are threefold. First, 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 di erences. Second, we show that DI take-up of children from low income families exhibits heterogeneity both over time (cyclically) and over place which is not apparent for children from richer families. Third, we show that places where poor children grow up to have the highest rate 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. State level tax policies are also predictive of DI rates; states with more generous EITCs, lower tax rates, and less progressive tax structures each tend to have higher DI take up. These are also the characteristics of places that tend to produce higher income mobility. We show that the relationship between child outcomes in terms of DI take-up and income mobility across places is mixed, but the places that tend to generate good outcomes on both measures are more rural. By comparison, this appears to be less true for the places generating particularly bad outcomes on both measures.

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