MRRC Working Papers
Recently released Michigan Retirement Research Center Working Papers are now available for download. View their Abstracts and Key Findings below.
* Spousal Labor Supply Responses to Government Programs: Evidence from the Disability Insurance Program by Susan Chen
* Personality and Response to the Financial Crisis by Angela Lee Duckworth and David Weir
* Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants by David Autor, Nicole Maestas, Kathleen Mullen and Alexander Strand
* Earnings Growth versus Measures of Income and Education for Predicting Mortality by Harriet Duleep and David A. Jaeger
Spousal Labor Supply Responses to Government Programs: Evidence from the Disability Insurance Program (WP 2010-261 ) by Susan Chen
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.
* Husbands’ disability insurance receipt has a small crowd-out effect on their wives’ labor supply.
* Husbands’ Disability Insurance receipt crowds out wives’ labor force participation by an estimated 8 percent and earnings by $2,200 for up to 5 years after the disability determination decision.
* For a sample of wives whose husband are homogeneous in terms of the severity of their health conditon, the estimates of the crowd-out effects are larger, at 11 percent and $2,600 for labor force participation and earnings. * These estimates represent an upper bound on the potential labor supply response of the wives of beneficiaries had their husbands not received benefits.
Personality and Response to the Financial Crisis (WP 2011-260) by Angela Lee Duckworth and David Weir
In a previous study, we found the family of personality traits known as conscientiousness to be associated in cross-sectional analyses with both lifetime earnings and wealth. In this study, we used data from an Internet survey of HRS respondents in the second quarter of 2009 to test whether conscientiousness and other Big Five factors prospectively predicted responses to the financial crisis of 2008/09. In addition, to improve the targeting and design of behavioral interventions for "at-risk" individuals, we examined two specific facets of conscientiousness (i.e., self-control and perseverance) that may be more highly related to these economic outcomes than other facets. Finally, we used data from the Consumption and Activities Mail Survey (CAMS) to examine whether personality is related to the proportion of income saved vs. spent.
Missing data precluded sufficiently powerful prospective analyses of personality and responses to the financial crisis. Likewise, data on self-control and perseverance from the 2010 experimental module were not sufficient at the time of final reporting to come to definitive conclusions about how these facets relate to economic outcomes. We did find that conscientious adults save more and spend less of their incomes, whereas adults who are higher in openness to experience (e.g., adventurous, sophisticated) save less and spend more of their income. The robust associations between conscientiousness and economic outcomes suggests further investigation of interventions that improve conscientiousness as well as policies that specifically target less conscientious individuals (e.g., default choices for retirement savings).
* The study found no notable associations between personality and response to the financial crisis; however, the sample size was insufficient to reach definitive conclusions.
* More conscientious adults save more of their income.
* Adults who are impulsive in the domain of finance save less of their income.
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Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants (WP 2011-258) by David Autor, Nicole Maestas, Kathleen Mullen and Alexander Strand
An influential body of research studies the labor supply and earnings of denied Social Security Disability Insurance (SSDI) applicants to estimate the potential employment and earnings of those awarded benefits. This research design implicitly treats employability as a stable applicant attribute that is not directly impacted by the process of applying for SSDI benefits. If, plausibly, applicants’ employment potential deteriorates while they are out of the labor force, then the labor force participation of denied applicants -- who spend an average of 10 months seeking benefits -- may understate their employment potential at the time of application. This paper tests whether the duration of SSDI applications causally affects applicants’ subsequent employment. We use a unique Social Security Administration workload database to identify exogenous variation in applicants’ initial decision times induced by differences in processing speed among the disability examiners to which they are randomly assigned. This variation significantly affects applicants’ total processing time but, importantly, is uncorrelated with their initial award and denial outcomes. We find that longer processing times reduce the employment and earnings of SSDI applicants in the years after their initial decision. A one standard deviation (2.4 month) increase in initial processing time reduces annual employment rates by 1 percentage point (3.2%) in years two, three and four post-decision. Extrapolating these effects to total applicant processing times, we estimate that the SSDI determination process directly reduces the post-application employment of denied applicants by approximately 3.6 percentage points (7%) and allowed applicants by approximately 5.2 percentage points (33%).
* We find that longer processing times of disability applications reduce the employment and earnings of SSDI applicants in the years after their initial decision.
* We estimate that the SSDI determination process directly reduces the post-application employment of denied applicants by approximately 7% and allowed applicants by approximately 33%.
* The mean determination time for allowed applicants significantly exceeds that of denied applicants (14.1 versus 9.7 months) because half of beneficiaries are allowed only after a lengthy appeal.
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