Spousal Labor Supply Responses to Government Programs: Evidence from the Disability Insurance Program

Susan Chen

Working Papers from University of Michigan, Michigan Retirement Research Center

Abstract: 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.

Pages: 36 pages
Date: 2012-04
New Economics Papers: this item is included in nep-ias, nep-lab and nep-lma
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Citations: View citations in EconPapers (10)

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