Disability and Distress: The Effect of Disability Programs on Financial Outcomes

Manasi Deshpande, Tal Gross and Yalun Su

American Economic Journal: Applied Economics, 2021, vol. 13, issue 2, 151-78

Abstract: What is the relationship between disability programs and financial distress? We provide the first evidence on this relationship using several markers of financial distress: bankruptcy, foreclosure, eviction, and home sale. Rates of these adverse financial events peak around the time of disability application. Using variation induced by an age-based eligibility rule, we find that disability allowance reduces the likelihood of bankruptcy by 20 percent, foreclosure by 33 percent, and home sale by 15 percent. We present evidence that these changes reflect true reductions in financial distress. Considering these extreme events increases the optimal disability benefit amount and suggests a shorter optimal waiting time between application and benefit receipt.

JEL-codes: G51 H55 J14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Disability and Distress: The Effect of Disability Programs on Financial Outcomes (2019)
Working Paper: Disability and Distress: The Effect of Disability Programs on Financial Outcomes (2019)
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DOI: 10.1257/app.20190709

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