asset accumulation and labor force participation of disability insurance applicants abstract this paper provides empirical evidence of the existence of forward looking asset accumulation behavior among disability insurance applicants previously examined only in the theoretical literature using panel data from the rand health and retirement study i show that rejected applicants for social security disability insurance ssdi possess significantly more assets than accepted applicants immediately prior to application and exhibit lower attachment to the labor force these empirical results are consistent with the theoretical prediction in diamond and mirrlees 1978 and golosov and tsyvinski 2006 that certain individuals with high unwillingness to work maximize utility by planning in advance for their future disability insurance application because the existing empirical literature on disability insurance does not account for this intertemporal channel it may underestimate the total work disincentive effect of ssdi

reconciling the old and new census bureau education questions recommendations for researchers beginning with the 1990 census and the january 1992 current population survey cps the bureau of the census changed the emphasis of its educational attainment question from years of education to degree receipt using a matched sample from the 1991 and 1992 march cps this article addresses how to reconcile the old and new questions the effects of those methods on the estimated return s to education are then examined both the estimated linear return and the estimated college high school wage differential are slightly larger using information from the new question

approval of social security disability appeals analysis of judges decisions this article is an empirical analysis of decisions by judges regarding requests by individuals for disability benefits applicants for disability benefits who are twice denied through the normal process can appeal to one of the social security administration s administrative law judges who hold appointed positions the data for this study are taken from decisions made by approximately 1000 judges for cases heard from 2010 through 2012 using each judge as a unit of observation the data reveal the number of cases heard and the number of approvals granted we augmented the data with additional information on the presiding judge and with data from the state in which the court resides the purpose of the study is to determine whether a simple model can explain first the volume of decisions rendered at the judge level and second the proportion of approvals results indicate that the volume of decisions can be explained in part by the judge s recent record of leniency evidence also supports the hypothes

local level incapacity benefits rolls in britain correlates and convergence mcvicar d local level incapacity benefits rolls in britain correlates and convergence regional studies there is considerable variation across british local authority districts in the proportion of the working age population claiming incapacity benefits ranging from 2 in hart to 16 in merthyr tydfil and easington in 2008 these claimant rates are strongly correlated with local unemployment rates and self reported disability rates but spatial differences in claimant rates for incapacity benefits were even greater a decade ago this paper describes the extent of this claimant rate convergence and discusses possible explanations for it mcvicar d 2008 hart 2 merthyr tydfil easington 16 10 mcvicar d la liste des demandeurs des prestations d incapacite en grande bretagne a l echelle loc

what have we learned from empirical studies of unemployment and turnover unemployment reminds economists that we have a lot to be modest about twenty years ago robert hall 1972 asked why is the unemployment rate so high at full employment at the time hall wrote male unemployment in the united states had risen to 3 5 percent and it would peak at 4 4 percent in the recession of 1971 since then every cyclical low of unemployment has exceeded the one before it the end of the 1980 s expansion reduced unemployment to about 4 5 percent and unemployment peaked at 7 4 percent of the labor force in the recession that just ended the natural rate of unemployment has evidently risen through time which led lawrence summers 1986 to place a modifier in hall s question why is the unemployment rate so very high in what follows i pose three questions about the causes and consequences of rising joblessness first who are the unemployed i will show that unemployment and nonparticipation are heavily concentrated among the least skilled and more importantly that virtually all of the long term increase in joblessness occurs among low wage men unemployment and nonparticipation among highly skilled men are unchanged since the 1960 s second what factors have caused jobless time to rise there are many theories including changes in labor force demographics social programs that discourage employment and changes in the amount of frictional unemployment caused by sectoral shifts none of these is consistent with the evidence which points instead to a secular decline in the demand for lessskilled workers the data also cast doubt on nonmarket clearing models of rising unemployment wages are demonstrably flexible in the long run and they have fallen dramatically among the unskilled whose jobless rates have risen third what happens to the unemployed in contrast to the view that unemployment spells cause transitory reductions in income recent evidence indicates that job losses have substantial and permanent effects on earning power many of the unskilled who are unemployed or out of the labor force appear to have been high wage workers whose specialized skills have become obsolete

fiscal implications of aids in south africa abstract the number of people living with hiv is alarmingly large in addition to the incomprehensible human suffering of those directly affected aids also has large negative economic effects in this paper i study the fiscal implications of the hiv aids epidemic in south africa in a standard neo classical growth model i find that an antiretroviral program is to a large extent self financing improvement in dependency ratios and health care cost savings would pay for rand 144 billion of a full epidemiological intervention the indirect effect through the changing demographic structure will be more important than the direct health care cost saving effect i also explore different taxation policies the households would be willing to sacrifice an amount equal to 12 of gdp in the first period to be subject to an optimal ramsey fiscal policy rather than an alternative fixed debt to gdp policy the optimal policy implies an increase in government debt during the peak of the epidemic

how financial incentives induce disability insurance recipients to return to work using a local randomized experiment that arises from a sharp discontinuity in disability insurance di policy in norway we provide transparent and credible identification of how financial incentives induce di recipients to return to work we find that many di recipients have considerable capacity to work that can be effectively induced by providing financial work incentives we further show that providing work incentives to di recipients may both increase their disposable income and reduce program costs our findings also suggest that targeted policies may be the most effective in encouraging di recipients to return to work

should pensions be progressive abstract the present paper quantitatively characterizes the consequences of rising pension progressivity in an overlapping generations model with idiosyncratic income disability and longevity risk as well as endogenous labor supply at the intensive and extensive margin focusing on the german pension system which is purely earnings related we increase the degree of progressivity and compute the optimal mix between flat and earnings related pensions we find that a flat rate pension share of roughly 30 maximizes aggregate economic efficiency since improved insurance provision dominates higher labor supply distortions disability risk significantly increases the optimal progressivity level while endogenous retirement has important macroeconomic implications since our results are robust for a wide range of parameter specifications they indicate that at least in germany a move towards more redistribution within the pension system is efficient

family welfare cultures strong intergenerational correlations in various types of welfare use have fuelled a long standing debate over whether welfare receipt in one generation causes welfare participation in the next generation some claim a causal relationship in welfare receipt across generations has created a culture in which welfare use reinforces itself through the family others argue the determinants of poverty or poor health are correlated across generations so that children s welfare participation is associated with but not caused by parental welfare receipt however there is little empirical evidence to sort out these claims in this paper we investigate the existence and importance of family welfare cultures in the context of norway s disability insurance di system to overcome the challenge of correlated unobservables across generations we take advantage of random assignment of judges to di applicants whose cases are initially denied some appeal judges are systematically more lenient which leads to random variation in the probability a parent will be allowed di using this exogenous variation we find strong evidence that welfare receipt in one generation causes welfare participation in the next generation when a parent is allowed di their adult child s participation over the next five years increases by 6 percentage points this effect grows over time rising to 12 percentage points after ten years while these findings are specific to our setting they serve to highlight that welfare reforms can have long lasting effects on program participation since any original effect on the current generation could be reinforced by changing the participation behavior of their children as well the detailed nature of our data allows us to compare the intergenerational transmission with spillover effects in other networks and to explore mechanisms our findings point to a special link between parents and their children with little impact due to close neighbors di participation we find suggestive evidence that what may change as a result of a parent being allowed di is their children s beliefs about the efficacy of trying to get on to the di program or their attitudes about di participation and its stigma

the long term effects of job search requirements evidence from the uk jsa reform this paper investigates long term returns from unemployment compensation exploiting variation from the uk jsa reform of 1996 which implied a major increase in job search requirements for eligibility and in the related administrative hurdle search theory predicts that such changes should raise the proportion of non claimant nonemployed with consequences on search effort and labor market attachment and lower the reservation wage of the unemployed with negative effects on post unemployment wages i test these ideas on longitudinal data from social security records llmdb using a difference in differences approach i find that individuals who start an unemployment spell soon after jsa introduction as opposed to six months earlier are 2 5 3 more likely to move from unemployment into incapacity benefits spells and 4 5 less likely to have positive earnings in the following year this latter employment effect only vanishes four years after the initial unemployment shock also annual earnings for the treated individuals are lower than for the non treated these results suggest that while tighter search requirements were successful in moving individuals off unemployment benefits they were not successful in moving them onto long lasting or better jobs with fairly long lasting unintended consequences on a number of labor market outcomes

agency and the design of welfare systems abstract transfers to the needy are administered by social workers whose job it is to tag welfare applicants to determine eligibility for disability benefits the accuracy of tagging depends on the effort of the social workers which is private information to prevent shirking and induce optimal effort costly monitoring is required using the framework of optimal non linear taxation we characterize the form of the optimal tax transfer system when the government operates a costly welfare system financed by income taxation higher income persons self select into the income tax system the needy apply for welfare if tagged they receive a disability benefit if untagged they receive general welfare benefits we characterize circumstances under which welfare recipients should or should not be induced to work the structure of the optimal tax transfer system and the optimal payment and monitoring of social workers

should america save for its old age fiscal policy population aging and national saving he federal government has recently seen an abrupt turnaround in its budget balance from years of deficits to the now predicted years of surpluses this switch has been widely hailed since many analysts believe that the united states saves too little and that the switch to government budget surpluses can help to address that problem indeed concern about low u s saving and the long term budget outlook has increased of late as the retirement of the baby boom generation draws closer and the financial pressures associated with population aging loom larger in this paper we cite a collection of arguments for why u s fiscal policy should be used to increase national saving then we focus on whether the aging of the u s population adds force to these arguments for boosting national saving and conclude perhaps surprisingly that it may not the potential role of fiscal policy in preparing the country for the coming demographic change is at the center of recent budget proposals although the sudden emergence of budget surpluses is to a large extent based on economic and other factors beyond the government s direct control one can argue that the political will to maintain these surpluses stems in part from a desire to prepare for the retirement of the baby boomers moreover the question of whether the projected surpluses should be devoted to new spending tax cuts or debt reduction is entangled with arguments over what portion of the surpluses should go to saving social security and medicare yet the appropriate saving response to population aging is not clear cut while aging boosts the demands on future resources it also changes the rate of return the u s economy can expect from saving the net effect of aging on desired saving is

the impact of the demographic transition on capital formation the population of the united states is aging we review a variety of the implications this has for u s national saving rates and discuss the policy issues that they raise after reviewing what different models would predict for household saving over the next several decades we consider how the demographic transition may also affect national saving through changes in government behavior ways in which the composition of household saving might change as individuals age are also analyzed along with the implications of changes in government fiscal policy for asset composition excerpt

a decade of tax and benefit reforms in sweden effects on labour supply welfare and inequality sweden has experienced a sequence of tax and benefit reforms during the last decade in this paper we evaluate these reforms from labour supply welfare and inequality points of view we depart from a household labour supply model simulation of the model reveals that tax and benefit reforms have led to a considerable reduction of the excess burden regarding social welfare and inequality we show that the results depend to a large extent on the income inequality measure and the measure of social welfare as well as the income concept household disposable income or money metric utility

paradoxical effects of increasing the normal retirement age a prospective evaluation abstract a life cycle model that incorporates both disability insurance di and old age insurance oai is developed to study social security reforms and is compared to an alternative model without di the model with di predicts that increasing the normal retirement age nra causes a decrease in employment and an increase in di receipt and that the decrease of payroll tax revenue and the increase of di expenses combined offset about 40 of the decrease of oai expenses these paradoxical effects of increasing the nra are absent from the model without di i employ both models to search for reforms that will balance the government budget in an economy with an aging population which has the demographics for the year 2100 and find that the required change in tax and benefit rules differ substantially across the two models

social security disability insurance applications awards and lifetime income flows this article provides new evidence about the impact of social security disability insurance on male labor force participation decisions based on estimates from a structural model of applications awards and state contingent lifetime income flows the lifetime framework makes it possible to consider long term opportunity costs associated with early labor force withdrawal and the disincentive to applications resulting from the statutory waiting period before benefits may be received estimation techniques account for the self selected nature of the pool of applicants when predicting the individual specific probability of acceptance and the opportunity costs of applying

cash on hand and competing models of intertemporal behavior new evidence from the labor market this paper presents new tests of the permanent income hypothesis and other widely used models of household behavior using data from the labor market we estimate the excess sensitivity of job search behavior to cash on hand using sharp discontinuities in eligibility for severance pay and extended unemployment insurance ui benefits in austria analyzing data for over one half million job losers we obtain three empirical results 1 a lump sum severance payment equal to two months of earnings reduces the job finding rate by 8 12 on average 2 an extension of the potential duration of ui benefits from 20 weeks to 30 weeks similarly lowers job finding rates in the first 20 weeks of search by 5 9 and 3 increases in the duration of search induced by the two programs have little or no effect on subsequent job match quality using a search theoretic model we show that estimates of the relative effect of severance pay and extended benefits can be used to calibrate and test a wide set of intertemporal models our estimates of this ratio are inconsistent with the predictions of a simple permanent income model as well as naive rule of thumb behavior the representative job searcher in our data is 70 of the way between the permanent income benchmark and credit constrained behavior in terms of sensitivity to cash on hand

panel estimates of the determinants of british regional male incapacity benefits rolls 1998 2006 this article explores the determinants of the proportion of the working age male population claiming incapacity benefits ib across the 11 british government office regions for the period 1998 to 2006 three different approaches are adopted to modelling register dynamics first treating ib stocks as if they were trend stationary albeit with persistence and estimating reduced form models for their logs second treating ib stocks as if they were nonstationary and examining their long run determinants plus short run equilibrium reversion properties third focusing on the determinants of gross inflows and outflows that together drive ib stocks given the nature of the data no approach is ideal yet the models provide reasonably robust evidence that labour market changes specifically falling unemployment rates and rising real earnings have contributed to falling male ib stocks over the period

the cyclical and secular behaviour of the labour input comparing efficiency units and hours worked summary a monthly labour input series designed to correct for the fact that all hours worked are not of the same quality is constructed and its properties compared with unadjusted hours worked this efficiency units series is constructed from bls data on hours worked and earnings by age and sex the cyclical fluctuations displayed by the efficiency units series are smaller on average than those displayed by hours worked although the difference is not large however the secular behaviour of the series is quite different hours worked per capita displays a significant positive trend while efficiency units per capita does not

disability transfers and the work decision of older men the potential causal relationship between the availability and generosity of disability transfers and the nonparticipation rates of older men is often asserted and much studied parsons 1980 haveman and wolfe 1984 leonard 1986 however estimates of the magnitude of this linkage vary widely the growth in transfer availability and generosity has been credited with from 30 to 100 percent of the significant post 1960 fall in older male participation rates the disparity in these research results stems primarily from 1 alternative sources of data that differentially constrain estimation of relevant expected wage and transfer incomes 2 specifications that are unable to distinguish income transfer from labor market effects and 3 reliance on measures of health status that are endogenous to the work leisure decision this study seeks to narrow the range of estimates by addressing each of these issues our utility maximization model of work status choice assumes that workers who differ in health status choose between the mutually exclusive options of working at the wage offered for their characteristics and accepting public or private disability transfers because the income flows in the two options are censored they are estimated using switching regression techniques as expectations conditional on exogenous individual characteristics hence accounting for the potentially endogenous process that separates wage earners from transfer recipients the marginal utilities of income from the two sources are allowed to differ because of stigma effects in the estimation we adjust the choice based nature of our sample employ longitudinal earnings data to measure expected changes in as distinct from the expected level of income in the two options and use a separately estimated latent health status measure largely purged of its endogeneity with the participation decision

does privatisation of vocational rehabilitation improve labour market opportunities evidence from a field experiment in sweden this paper analyses if privatisation of vocational rehabilitation can improve labour market opportunities for individuals on long term sickness absence we use a field experiment performed by the p

do nominal devaluations lead to real devaluations in ldcs abstract devaluation or depreciation of nominal exchange rate is a policy to boost exports however since any favorable effects of devaluation could be offset by its inflationary effects one must consider real devaluation this note investigates whether nominal devaluation leads to real devaluation by employing a relatively new method of cointegration and error correction modeling

the rise in the disability rolls and the decline in unemployment between 1984 and 2001 the share of nonelderly adults receiving social security disability insurance income di rose by 60 percent to 5 3 million beneficiaries rapid program growth despite improving aggregate health appears to be explained by reduced screening stringency declining demand for less skilled workers and an unforeseen increase in the earnings replacement rate we estimate that the sum of these forces doubled the labor force exit propensity of displaced high school dropouts after 1984 lowering measured u s unemployment by one half a percentage point steady state calculations augur a further 40 percent increase in the rate of di receipt

the employment effect of stricter rules for eligibility for di evidence from a natural experiment in sweden we study the effect of a reform of the swedish disability insurance di program whereby the special eligibility rules for workers in the age group 60 to 64 were abolished first we use a differences in differences approach to study changes in the disability take up as compared to the age group 55 to 59 then we use a similar approach to study to what extent the employment effect of the reform is crowded out by an increase in the utilization of the sickpay insurance si and or the unemployment insurance ui in an extended analysis we study the effect of firm closure on employment and the utilization of different labor market insurance programs in different age groups before and after the reform

public saving and policy coordination in aging economies in the coming decades the share of people of working age will fall significantly in most developed countries according to optimal taxation theory public debts should be reduced before the baby boom generation retires i find that if debts are instead maintained at current levels welfare may be reduced substantially in countries with a large public sector and or a large demographic change since population aging will be less dramatic in the united states than in europe and japan capital will move from europe and japan to the united states these capital movements will facilitate the us demographic transition but aggravate the transition in most european countries

effective tax rates in macroeconomics cross country estimates of tax rates on factor incomes and consumption abstract this paper proposes a method for computing tax rates using national accounts and revenue statistics using this method we construct time series of tax rates for large industrial countries the method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases this method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework these tax rates compare favorably with existing estimates of marginal tax rates and highlight important international differences in tax policy

disability capacity for work and the business cycle an international perspective important policy issues arise from the high and growing number of people claiming disability benefits for reasons of incapacity for work in oecd countries economic conditions play an important part in explaining both the stock of disability benefit claimants and inflows to and outflows from that stock employing a variety of cross country and country specific household panel data sets as well as administrative data we find strong evidence that local variations in unemployment have an important explanatory role for disability benefit receipt with higher total enrolments lower outflows from rolls and often higher inflows into disability rolls in regions and periods of above average unemployment in understanding the nature of the cyclical fluctuations and trends in disability it is important to distinguish between work disability and health disability the former is likely to be influenced by economic conditions and welfare programmes while the latter evolves in a slower fashion with medical technology and demographic changes there is little evidence of health disability being related to the business cycle so cyclical variations are driven by work disability the rise in unemployment due to the current global economic crisis is expected to increase the number of disability insurance claimants

disability insurance benefits and labor supply a critical input for assessing the optimal size of disability insurance programs is the elasticity of labor force participation with respect to the generosity of benefits unfortunately this parameter has been difficult to estimate in the context of the u s disability insurance program since all workers face an identical benefits schedule i surmount this problem by studying the experience of canada which operates two distinct disability insurance programs for quebec and for the rest of canada the latter program raised its benefits by 36 percent in january 1987 whereas benefits in quebec were constant i find a sizable labor supply response to the policy change my central estimates imply an elasticity of labor force nonparticipation with respect to disability insurance benefits of 0 28 0 36

on the consequences of demographic change for rates of returns to capital and the distribution of wealth and welfare in the industrialized world the population is aging over time reducing the fraction of the population in working age consequently labor is expected to be scarce relative to capital with an ensuing decline in the real return on capital this paper uses demographic projections together with a large scale multi country overlapping generations model with uninsurable idiosyncratic uncertainty to quantify the distributional and welfare consequences of these changes in factor prices induced by the demographic transition in our model capital can freely flow between different regions in the oecd the u s the eu and the rest of the oecd thus international capital flows may in principle mitigate the decline in rates of returns one would expect in the u s if it were a closed economy we find exactly the opposite in the u s as an open economy rates of return are predicted to decline by 86 basis points between 2005 and 2080 if the u s were a closed economy this decline would amount to only 78 basis points this result is due to the fact that other regions in the oecd will age even more rapidly therefore the u s is importing the more severe aging problem from these regions especially europe a similar conclusion is reached if we let capital flow freely between the oecd and the rest of the world row while row currently has a younger population structure it is predicted to age even more severely in the next decades giving rise to an even more pronounced decline in world rates of return to capital in order to evaluate the welfare consequences of the demographic transition we ask the following hypothetical question suppose a household economically born in 2005 would live through the economic transition with changing factor prices induced by the demographic change but keeping her own survival probabilities constant at their 2005 values how would its welfare have changed relative to a situation without a demographic transition we find that households experience significant welfare losses due to the demographic transition in the order of 2 5 of consumption depending on their initial productivity level and the design of the pension system these losses are mainly due to the fact that lower future returns to capital make it harder for households to save for retirement on the other hand if the oecd suddenly opens up to row in 2005 and row has higher returns to capital before the world capital market integration then these losses are reduced to 1 5 2 5

demography national savings and international capital flows this paper addresses the relationship between age distribution national savings and the current account balance the results point to substantial demographic effects with increases in both the youth and old age dependency ratios associated with lower savings rates they also point to differential effects on savings and investment and thus to a role for demography in determining the current account balance the estimated demographic effect on the current account balance exceeds 6 percent of gdp over the last three decades for a number of countries and given expected demographic trends is likely to be substantially larger over the coming decades copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the impact of age pension eligibility age on retirement and program dependence evidence from an australian experiment abstract governments around the world are reforming their social security systems in light of the challenges posed by population aging we study the 1993 australian age pension reform which progressively increased the eligibility age for women from 60 to 65 years we find economically significant responses to the reform an increase in the eligibility age of one year induced a decline in the probability of retirement by 12 to 19 percentage points in addition the reform induced significant program substitution with increases in enrollment in other social insurance programs particularly the disability support pension which effectively functioned as an alternative source of retirement income

early retirement policy in the presence of competing exit pathways evidence from pension reforms in finland i study the effects of changes in the eligibility age thresholds for unemployment and part time pensions and the effect of tightening medical criteria for disability pension eligibility in finland particular attention is paid to the spillover effects of the pension reforms these pension reforms jointly raised the average age at which workers leave employment by 3 9 months mainly due to a sharp drop in disability pension enrolment from age 58 upwards and a lower incidence of unemployment at younger ages these effects are heterogeneous much of which is attributable to the spillover effects that vary across individuals

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

the growth in the social security disability rolls a fiscal crisis unfolding the u s social security disability insurance di program has grown dramatically over the last 20 years in size and expense this growth poses significant risks to the finances of the di program and the broader social security system and raises troubling questions as to whether the program is being misused by claimants this article first provides an overview of the disability insurance program describing who qualifies for the program how an individual applies for benefits and how the level of benefits is determined next we summarize the factors responsible for the growth in the di rolls and discuss how the characteristics of di recipients have changed as a result we then explore the extent of moral hazard in the di program and the effectiveness of the screening process in distinguishing meritorious from nonmeritorious claims finally we identify the challenges that the di program creates for social security finances and social security reform and discuss potential reforms to the di program

the health and earnings of rejected disability insurance applicants applicants for social security disability benefits who fail to pass the medical screening form a natural control group for beneficiaries data drawn from the 1972 and 1978 surveys of the disabled done for the social security administration show that fewer than 50 percent of rejected male applicants work typical earnings of those that do are less than 59 percent of median earnings for other men their age these data cast doubt on recent econometric work that suggests that the disincentive effects of the social security disability program have been substantial copyright 1989 by american economic association

does medicare save lives health insurance characteristics shift at age 65 as most people become eligible for medicare we measure the impacts of these changes on patients who are admitted to hospitals through emergency departments for conditions with similar admission rates on weekdays and weekends the age profiles of admissions and comorbidities for these patients are smooth at age 65 suggesting that the severity of illness is similar on either side of the medicare threshold in contrast the number of procedures performed in hospitals and total list charges exhibit small but statistically significant discontinuities implying that patients over 65 receive more services we estimate a nearly 1 percentage point drop in 7 day mortality for patients at age 65 equivalent to a 20 reduction in deaths for this severely ill patient group the mortality gap persists for at least 9 months after admission

the concomitants of exchange rate depreciation less developed countries 1971 1973 this study shows what happens when less developed countries ldcs revalue their currencies with these findings we aim to provide evidence toward improving their currency valuation policies a background presumption and justification for the inquiry is that disequilibrium exchange rates can be an important cause of serious injury to economic performance against which the costs of shifting toward equilibrium rates can be measured but whether or not this presumption is valid exchange rate variation is a phenomenon with potential major effects which should be known more accurately so that policy can be better guided exchange rate revaluation is taken to mean a substantial alteration in the average rate at which transactions are effected between domestic and foreign currencies this concept implies three problems the exchange rate shift must be a certain size for it to be counted one country has current and capital transactions with a number of other countries and transactions may be carried out at both official and free black market rates section i below addresses these problems

disability earnings income and consumption using longitudinal data for the period 1968 2005 for a sample of male household heads we determine the prevalence of disability during the working years and examine how the extent of disability affects a range of outcomes including earnings income and consumption we have seven main findings first disability rates are high we divide the disabled along two dimensions based on the persistence and severity of their work limiting condition we estimate that a person reaching age 56 has a 53 percent chance of having been disabled at least once during his working years and a 19 percent chance that he has begun a chronic and severe disability second the economic consequences of disability are frequently profound ten years after disability onset a person with a chronic and severe disability on average experiences a 68 percent decline in earnings a 32 percent decline in after tax income a 22 percent decline in food and housing consumption and a 21 percent decline in food consumption third the various economic consequences differ sharply across disability groups the outcome declines for those with a chronic and severe disability are often more than twice as large as those for the average disabled fourth our findings show the partial and incomplete roles that individual savings family support and social insurance play in reducing the consumption drop that follows disability only about half of this most disabled group reports receiving social security disability insurance or supplemental security income fifth we find a noticeable fall in earnings and income prior to the onset of a reported disability consumption also falls somewhat suggesting that future disability is partially but incompletely predictable in the short run sixth time use and detailed consumption data further indicate that disability is associated with a decline in well being seventh the quantities we have estimated combined with elasticities from the literature allow us to examine the optimality of current compensation for the disabled we find that the current compensation for our most disabled group appears to be lower than is optimal

did vietnam veterans get sicker in the 1990s the complicated effects of military service on self reported health abstract the veterans disability compensation vdc program which provides a monthly stipend to disabled veterans is the third largest american disability insurance program since the late 1990s vdc growth has been driven primarily by an increase in claims from vietnam veterans raising concerns about costs as well as health we use the draft lottery to study the long term effects of vietnam era military service on health and work in the 2000 census we find no evidence that military service affected overall employment rates or overall work limiting disability rates that is health conditions that make work difficult at the same time military service sharply increased federal transfer income especially for lower skilled white men among whom there was also a large negative impact on employment and a marked increase in disability rates the differential impact of vietnam era service on low skilled men cannot be explained by more combat or war theatre exposure for the least educated because high school graduates were at least as likely to be exposed to combat or war theatre as the less educated this leaves the relative attractiveness of vdc for less skilled men and the work disincentives embedded in the vdc system as a likely explanation for our findings

trends in employment and earnings of allowed and rejected applicants to the social security disability insurance program since the early 1980s changes in the economic environment and in the process for determining eligibility for the social security disability insurance di program have had significant effects on the program first the economic situation and labor force opportunities for lower skilled people continued to decline leading to lower rates of participation in the labor force for less educated men second changes in the eligibility process made it easier to obtain di benefits based on conditions difficult to clearly identify on medical terms alone such as back pain or depression 1 those two factors have likely contributed to a substantial increase in the number of individuals receiving di as well as a significant change in the characteristics of applicants and new beneficiaries over the same period both applicants and new beneficiaries have become younger longer lived more likely to apply because of nonterminal conditions such as back pain or mental health and more likely to be female 2 as a result recent work projects a rapid increase in program costs as greater numbers of beneficiaries stay on the program for more years e g david h autor and duggan 2006 the concurrent developments in the economy and eligibility rules have also fueled the concern that the generosity of di increasingly induces low income workers to apply for and sometimes receive benefits and that some of those beneficiaries would be able to work in the absence of the program indeed a growing body of research suggests that some workers in difficult economic conditions exit the labor force to

medicaid expansions for the working age disabled revisiting the crowd out of private health insurance disabled individuals under 65 years old account for 15 of medicaid recipients but half of all medicaid spending despite their large cost few studies have investigated the effects of medicaid expansions for disabled individuals on insurance coverage and crowd out of private insurance using an eligibility expansion that allowed states to provide medicaid to disabled individuals with incomes less than 100 of the federal poverty level i address these issues crowd out estimates range from 49 using an ordinary least squares procedure to 100 using two stage least squares analysis this potentially large degree of crowd out could have fiscal implications for the affordable care act which has greatly expanded medicaid eligibility in 2014

sustaining fiscal policy through immigration this paper explores the fiscal implications of immigration to the us and argues that immigration policy should be viewed as a vital part of fiscal policy in particular a case is made that skill

unemployment insurance takeup rates and the after tax value of benefits the recent decline in the unemployment insurance ui takeup rate has puzzled researchers using administrative data with accurate information on the potential level and duration of benefits we examine whether a separating employee receives ui we find a strong positive effect of the benefit level on takeup and smaller effects of the potential duration and the tax treatment of benefits simulations indicate that the recent inclusion of ui in the income tax base can account for most of the previously unexplained decline in ui receipt

can social security explain trends in labor force participation of older men in the united states after a long decline the labor force participation rate lfpr of older men in the united states leveled off in the 1980s and began to increase in the late 1990s we examine how changes in social security rules affected these trends we attribute only a small portion of the decline from the 1960s 80s to the increasing generosity of social security over this period increases in the full retirement age and the delayed retirement credit explain one quarter to one half of the recent increase in the lfpr increasing educational attainment and increasing lfpr of married women also contributed to the recent rise

why do disability benefit rolls vary between regions a review of the evidence from the usa and the uk mcvicar d 2006 why do disability benefit rolls vary between regions a review of the evidence from the usa and the uk regional studies 40 519 533 over the last 30 years many organization for economic co operation and development oecd countries have seen a dramatic rise in the share of the working age population receiving earnings replacement sickness and disability benefits the reasons behind this growth particularly for the usa but also to a lesser extent elsewhere have been extensively researched in the economics literature what have been less well researched are the large spatial differences in the size of disability benefit rolls that have emerged in some countries over this period the uk displays a distinct regional pattern where working age men and women in the north are considerably more likely to be claiming disability benefits than those in the south the usa has its own version of the north south divide with many southern states displaying disproportionately large disabilit

disability insurance rejection rates and the labor supply of older workers abstract we investigate the effects of trying to mitigate moral hazard in the disability insurance di program by raising the stringency of the screening process for applicants we do so by studying a dramatic increase in rejection rates for the di program in the late 1970s which varied substantially across the us states we find that each 10 rise in denial rates led to a statistically significant 2 8 fall in labor force non participation among 45 64 year old males we also find that the denial rate increases effectively targeted their incentive effects to more able individuals according to an anthropometric measure of disability

disability policy and the labor market evidence from a natural experiment in canada 1998 2006 abstract this paper examines the effect of changes in two key parameters in disability policy a the earnings that disability insurance beneficiaries are allowed to earn without losing their disability benefits and b automatic reinstatement where beneficiaries can have benefits reinstated without re application and re testing for disability determination we examine the effects of these policy changes on the probability of employment for disability beneficiaries as well as the flows onto and off the disability rolls we obtain our estimates using a difference in difference strategy that exploits the unique structure of disability insurance arrangements in canada namely that there are two programs one that covers individuals in the province of quebec and one in the rest of canada our preferred estimates indicate that the introduction of the allowable earnings change increased the propensity of disability beneficiaries to work but we do not find that the earnings exemption had an effect on the flows on to or off the disability rolls in contrast we find that the introduction of the automatic reinstatement policy did not have an effect on any of the outcomes we examine

assessing the effect of payroll taxes on formal employment the case of the 2012 tax reform in colombia in 2013 colombia implemented a tax reform that reduced payroll taxes by a total of 13 5 percentage points of wages this paper evaluates the effects of this component of the 2012 colombian tax reform on firms formal employment and average wages we construct a panel of firms based on their employees administrative records to account for the endogeneity of the treatment we use an instrumental variables technique that exploits the exogenous variation from the decisions of firms that are similar to each other in several dimensions but belong to different economic sectors based on our preferred specification we estimate a positive and significant increase in formal employment as a result of the implementation of the reform of approximately 213 000 jobs in existing pre reform firms in the long run these effects will increase to more than 600 000 jobs the effect of the reform on the average wages paid by firms was also found to be positive for some sizes of firms but the overall effect in the short run is rather small

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

distinguishing income from substitution effects in disability insurance a set of studies conducted over the last 15 years has produced a near consensus that the social security disability insurance system ssdi has substantial disincentive effects on the labor supply of near elderly males diminishing labor force participation increasing the sensitivity of labor force exit decisions to adverse economic shocks and encouraging those nearing retirement to claim disability benefits and subsequently transfer into the social security retirement program yet efforts by the social security administration ssa to encourage labor supply among the disabled by removing the work disincentives built into ssdi have been almost entirely unsuccessful most notably in 1999 congress authorized the ticket to work program which provides an array of inducements for current ssdi beneficiaries to take up employment including permitting a trial work period of up to nine months providing 7 75 years of ongoing medicare eligibility following return to work and providing three years of automatic benefit reinstatement when claimants workplace earnings fall below a threshold level each of these steps reduces the implicit tax placed on labor supply by the ssdi program despite these lures fewer than 1 400 0 01 percent of the 12 2 million tickets issued to date have led to successful workforce integration autor and duggan 2006

optimal income transfer programs intensive versus extensive labor supply responses this paper analyzes optimal income transfers for low incomes labor supply responses are modeled along the intensive margin intensity of work on the job and along the extensive margin participation into the labor force when behavioral responses are concentrated along the intensive margin the optimal transfer program is a classical negative income tax program with a substantial guaranteed income support and a large phasing out tax rate however when behavioral responses are concentrated along the extensive margin the optimal transfer program is similar to the earned income tax credit with negative marginal tax rates at low income levels and a small guaranteed income carefully calibrated numerical simulations are provided

the evolution of medical spending risk how has the economic risk of health spending changed over time for u s households we describe trends in aggregate health spending in the united states and how private insurance markets and public insurance programs have changed over time we then present evidence from consumer expenditure survey microdata on how the distribution of household spending on health that is out of pocket payments for medical care plus the household s share of health insurance premiums has changed over time this distribution has shifted up over time households spend more on medical care and insurance than they used to but for the purposes of measuring change in risk it is not the mean but the dispersion of this distribution that is of interest we consider two measures of dispersion that serve as proxies for household risk the standard deviation of the distribution of household health spending and the ratio of the 90th percentile of spending to the median the so called 90 50 gap we find surprisingly that neither has increased despite the rapid rise in aggregate health spending this conclusion holds true for broad subgroups of the population for example the nonelderly as a group but not for some narrowly defined subgroups for example low income families with children we next consider how much risk households should face from the perspective of economic efficiency household risk may not have changed much over the past several decades but do we have any evidence that this level represents either too much or too little risk finally we discuss implications for public policy in particular for current debates over expanding health insurance coverage to the uninsured

does disability insurance receipt discourage work using examiner assignment to estimate causal effects of ssdi receipt abstract we present the first causal estimates of the effect of social security disability insurance benefit receipt on labor supply using all program applicants we use administrative data to matc

how do unemployment insurance benefits affect the decision to apply for social security disability insurance this paper examines whether unemployment insurance ui benefits affect the decision to apply for social security disability insurance di using data from the survey of income and benefits matched to administrative records on di applications i find that higher ui benefits reduce applications for di this substitution effect is imprecisely estimated but economically significant implying that a 1 00 increase in ui benefits reduces di expenditures by 15 cents recognizing this cost saving effect would increase the optimal ui benefit level by more than 20 percent for coefficients of relative risk aversion ranging from two to five

disability transfers self reported health and the labor force attachment of older men evidence from the historical record we use trends in self reported disability to gauge the impact of the growth of disability transfer programs on the labor force attachment of older working aged men our tabulations suggest that between 1949 and 1987 about half of the 4 9 percentage point drop in the labor force participation of men aged 45 54 and between one quarter and one third of the 19 9 point drop among men aged 55 64 represented a movement of men out of the labor force and onto the rolls of transfer programs targeted at the disabled since the expansion of transfer programs represents only one of the forces behind this movement these figures represent upper bounds on the impact of such programs on work force attachment

recessions retirement and social security this paper examines how labor market fluctuations around the time of retirement affect the labor force status and social security receipt of individuals ages 55 to 69 and the income of retirees in their 70s using data from the march current population survey census and american community surveys we find that workers are more likely to leave the labor force to collect social security earlier and to have lower social security income when they face a recession near retirement the impact is greatest for the less educated who are more susceptible to job loss and rely more heavily on social security

incarceration and racial inequality in men s employment to estimate employment population ratios for black and white men with an adjustment for incarceration a factor overlooked by most research on employment inequality the authors combine data from sur

economic aspects of optimal disability benefits this paper analyzes optimal disability and retirement or welfare benefits with imperfect disability evaluation with some able workers judged disabled and some disabled workers judged able thus the levels of both disability and retirement benefits affect labor supply with anyone not working eligible for retirement benefits we analyze the optimal structure of benefits for a given disability screening mechanism and briefly consider the problem of optimal evaluations of disability evidence in the united states there is an overlap in eligibility for disability and retirement portions of social security more generally welfare is sometimes available to people denied disability benefits

aching to retire the rise in the full retirement age and its impact on the social security disability rolls abstract the social security amendments of 1983 reduced the generosity of social security retired worker benefits in the u s by increasing the program s full retirement age from 65 to 67 and increasing the penalty for claiming benefits at the early retirement age of 62 these changes were phased in gradually so that individuals born in or before 1937 were unaffected and those born in 1960 or later were fully affected no corresponding changes were made to the program s disabled worker benefits and thus the relative generosity of social security disability insurance ssdi benefits increased in this paper we investigate the effect of the amendments on ssdi enrollment by exploiting variation across birth cohorts in the policy induced reduction in the present value of retired worker benefits our findings indicate that the amendments significantly increased ssdi enrollment since 1983 with an additional 0 6 of men and 0 9 of women between the ages of 45 and 64 receiving ssdi benefits in 2005 as a result of the changes our results further indicate that these effects will continue to increase during the next two decades as those fully exposed to the reduction in retirement benefit generosity reach their fifties and early sixties

labor supply effects of the recent social security benefit cuts empirical estimates using cohort discontinuities abstract in response to a crisis in social security financing two decades ago congress implemented an increase in the normal retirement age nra of 2 months per year for cohorts born in 1938 and after these cohorts began reaching retirement age in 2000 this paper studies the effects of these benefit cuts on recent retirement behavior the evidence suggests that the mean retirement age of the affected cohorts has increased by about half as much as the increase in the nra if older workers continue to increase their labor supply in the same way there might be important implications for the estimates of social security trust fund exhaustion that have played such a major role in recent discussions of social security reform

greater wage inequality reduces average hours of work i argue that rising inequality in offered wages lowers average working hours if labour supply is concave in wages a decrease in the working hours of low paid workers is greater than an increase in working hours of high paid workers furthermore due to low market opportunities some low paid workers may leave the labour force using cps morg data for prime age men i find evidence in support of this explanation i establish empirically the concavity of the labour supply and find evidence that after controlling for the average wage wage inequality has a negative effect on labour supply

social security and households saving this paper provides new evidence on the substitutability between private and pension wealth by exploiting the italian pension reform of 1992 we use a difference in difference estimator that exploits the differential effects of the reform on individuals belonging to several yea of birth cohorts and different occupational groups we find convincing evidence that saving rates increase as a result of a reduction in pension wealth by allowing for the possibility that substitutability changes with age we find that substitutability is particularly high and precisely estimated for workers between 35 and 45

two questions about european unemployment a general equilibrium search model makes layoff costs affect the aggregate unemployment rate in ways that depend on equilibrium proportions of frictional and structural unemployment that in turn depend on the generosity of government unemployment benefits and skill losses among newly displaced workers the model explains how before the 1970s lower flows into unemployment gave europe lower unemployment rates than the united states and also how after 1980 higher durations have kept unemployment rates in europe persistently higher than in the united states these outcomes arise from the way europe s higher firing costs and more generous unemployment compensation make its unemployment rate respond to bigger skill losses among newly displaced workers those bigger skill losses also explain why u s workers have experienced more earnings volatility since 1980 and why especially among older workers hazard rates of gaining employment in europe now fall sharply with increases in the duration of unemployment

afdc ssi and welfare reform aggressiveness caseload reductions versus caseload shifting welfare reform has made receipt of cash benefits more difficult and less attractive for single mothers we examine whether reforms of afdc affected caseloads of another program supplemental security income ssi we exploit state variation in welfare reform over time and find that female headed households in states aggressively pursuing welfare reform were 21 6 percent more likely to receive ssi this implies that a decrease in caseloads in one program cannot be interpreted as an equal sized decrease in the number of families receiving public assistance in addition our results have policy implications for the well being of families affected by welfare reform time limits

the impact of economic conditions on participation in disability programs evidence from the coal boom and bust abstract we examine the impact of the coal boom of the 1970 s and the coal bust of the 1980 s on disability program participation these shocks provide clear evidence that as the value of labor market participation increases disability program participation falls for the disability insurance program the elasticity of payments with respect to local earnings is between 0 3 and 0 4 and for supplemental security income the elasticity is between 0 4 and 0 7 consistent with a model where qualifying for disability programs is costly the relationship between economic conditions and program participation is much stronger for permanent than for transitory economic shocks

pension reform and labor supply abstract we exploit a comprehensive restructuring of the early retirement system in norway in 2011 to examine labor supply responses to increases in work incentives and actuarially neutral reductions in the age of first access to pension benefits we find that increasing the returns to work is a powerful policy the removal of an earnings test implying a doubling of the average net take home wage led to an increase in average labor supply by 7 h per week 30 at age 63 and by 8 h 46 at age 64 the responses primarily came at the extensive margin in contrast reducing the access age has almost no effect on labor supply in our setting with actuarially fair work incentives

screening disability insurance applications this paper investigates the effects of stricter screening of disability insurance applications a large scale experiment was setup where in two of the 26 dutch regions case workers of the disability insurance administration were instructed to screen applications more stringently the empirical results show that stricter screening reduces long term sickness absenteeism and disability insurance applications we find evidence for direct effects of stricter screening on work resumption during the period of sickness absence and for self screening by potential disability insurance applicants stricter screening seems to improve targeting efficiency without inducing negative spillover effects to the inflow into unemployment insurance the costs of stricter screening are only a small fraction of the monetary benefits

the impact of stricter criteria for disability insurance on labor force participation this paper studies the effect of a large scale policy change in the austrian disability insurance program which tightened eligibility criteria for men above a certain age using administrative data on the universe of austrian private sector employees the results of difference in difference regressions suggest a substantial and statistically significant decline in disability enrollment of 6 to 7 4 percentage points and an increase in employment of 1 6 to 3 4 percentage points the policy change had important spillover effects into the unemployment and sickness insurance program specifically the share of individuals receiving unemployment benefits increased by 3 5 to 3 9 percentage points and the share receiving sickness insurance benefits by roughly 0 7 percentage points

disability screening and labor supply evidence from south africa yet research that examines the poverty reduction and labor supply effects of disability programs has taken place exclu sively in developed countries with relatively low unemployment and high labor force participa tion rates in developing countries with high unemployment rates the disincentive effect of cash transfers on labor supply has often been assumed to be economically insignificant anne case and angus deaton 1998 in this paper i provide initial evidence on and draw attention to the effect of the south africa disability grant dg program on labor supply in the context of a policy change in disability screening i use a difference in differences estimator to assess the effect of a change toward a less intensive dis ability screening on labor force nonparticipation for older individuals if screening for disability benefit programs were perfect the supply of disability benefits would be independent of labor supply decisions and only those unable to work due to health con ditions would receive benefits however the dis ability screening process is imperfect because it is in practice difficult to determine whether a person is able to work which is the typical test of eligibility for disability benefit programs recent evidence suggests that the work disincen tive effects of disability benefits are expected to

does raising the early retirement age increase employment of older workers two pension reforms in austria increased the early retirement age era from 60 to 62 for men and from 55 to 58 25 for women we find that raising the era increased employment by 9 75 percentage points among affected men and by 11 percentage points among affected women the reforms had large spillover effects on the unemployment insurance program but negligible effects on disability insurance claims specifically unemployment increased by 12 5 percentage points among men and by 11 8 percentage points among women the employment response was largest among high wage and healthy workers while low wage and less healthy workers either continued to retire early via disability benefits or bridged the gap to the era via unemployment benefits taking spillover effects and additional tax revenues into account we find that for a typical birth year cohort a one year increase in the era resulted in a reduction of net government expenditures of 107 million euros for men and of 122 million euros for women

the social security early entitlement age in a structural model of retirement and wealth abstract a structural life cycle model of retirement and wealth attributes retirement peaks at both ages 62 and 65 to social security rules and wide heterogeneity in time preferences those with high discount rates often retire at 62 they have few assets and heavily value lost benefits from working after 62 largely ignoring potential increases in later benefits declining actuarial adjustments beginning at 65 induce those with low discount rates to retire at 65 raising the social security early entitlement age to 64 induces 5 of the population to delay retiring shifting the retirement spike from 62 to 64

immigration and inequality immigration is often viewed as a proximate cause of the rising wage gap between highand low skilled workers nevertheless there is controversy over the appropriate theoretical and empirical framework for measuring the presumed effect and over the precise magnitudes involved this paper offers an overview and synthesis of existing knowledge on the relationship between immigration and inequality focusing on evidence from cross city comparisons in the u s while some researchers have claimed that a cross city research design is inherently flawed i argue that the evidence from cross city comparisons is remarkably consistent with recent findings based on aggregate time series data in particular cross city and aggregate time series comparisons provide support for three key conclusions 1 workers with below high school education are perfect substitutes for those with a high school education 2 high school equivalent and college equivalent workers are imperfect substitutes with an elasticity of substitution on the order of 2 3 within education groups immigrants and natives are imperfect substitutes together these results imply that the average impacts of recent immigrant inflows on the relative wages of u s natives are small the effects on overall wage inequality including natives and immigrants are larger reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives even so immigration accounts for a small share 5 of the increase in u s wage inequality between 1980 and 2000

temporary disability insurance and labor supply evidence from a natural experiment most developed countries have compulsory insurance programs for temporary disability that is cash benefits for non work related sickness despite the economic significance of these programs little is known about their effects on work absenteeism or labor supply we exploit a policy reform that consisted of the abolishment of a waiting day together with an increase of cash benefits for short sick leaves we find that the total number of days of sickness absence was reduced by the reform which is likely due to the fact that the abolishment of the waiting period made it less costly for workers to be absent for short periods

adjustment policies and the real exchange rate in kenya since 1975 abstract we show using several proxies that the real exchange rate in kenya has moved in accordance with the dependent economy model since 1975 the adjustment policy supported by the international monetary fund imf in the first half of the 1980s led to a rise in the kenyan real exchange rate and an improvement of its external position macroeconomic policy since 1986 however has resulted in a deterioration of the external position and is likely to result in a reduction in the real exchange rate in the near future

who feels the calorie crunch and when the impact of school meals on cyclical food insecurity abstract monthly welfare programs such as the supplemental nutrition assistance program snap produce consistent cycles of expenditure and consumption among recipients food insecurity health status crime poor behavior and test scores track these cycles this paper leverages new data from the usda the foodaps survey to better understand these cycles in three ways first i find that expenditure and consumption cycles are correlated within households a fact not previously established second i study diet quality over the benefit month and find that it worsens potentially compounding the harmful consequences of cyclical food insecurity third i find that kids bear less of the burden of the consumption cycle than adults and that much of this difference may be driven by school meal programs this finding suggests large potential gains in child welfare from expanding summer meal programs