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

ManasI Deshpande, Tal Gross and Yalun Su ()
Additional contact information
Yalun Su: University of Chicago

No 2019-020, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: We provide the first evidence on the relationship between disability programs and markers of financial distress: bankruptcy, foreclosure, eviction, and home sale. Rates of these adverse financial events peak around the time of disability application and subsequently fall for both allowed and denied applicants. To estimate the causal effect of disability programs on these outcomes, we use variation induced by an age-based eligibility rule and find that disability allowance substantially reduces the likelihood of ad- verse financial events. Within three years of the decision, the likelihood of bankruptcy falls by 0.81 percentage point (30 percent), and the likelihood of foreclosure and home sale among homeowners falls by 1.7 percentage points (30 percent) and 2.5 percentage points (20 percent), respectively. We find suggestive evidence of reductions in eviction rates. Conversely, the likelihood of home purchases increases by 0.86 percentage point (20 percent) within three years. 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.

Keywords: disability; bankruptcy; eviction (search for similar items in EconPapers)
JEL-codes: D14 H50 I30 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-cfn and nep-hea
Note: MIP
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Citations: View citations in EconPapers (4)

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http://humcap.uchicago.edu/RePEc/hka/wpaper/Deshpa ... ability-distress.pdf First version, March 2019 (application/pdf)

Related works:
Journal Article: Disability and Distress: The Effect of Disability Programs on Financial Outcomes (2021)
Working Paper: Disability and Distress: The Effect of Disability Programs on Financial Outcomes (2019)
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