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Key Findings Details

The Labor Supply Effects of Disability Insurance: Evidence from Automatic Conversion Using Administrative Data
Nicole Maestas and Jae Song
WP 2010-247

  • Surprisingly, labor supply increases when the strict DI work rules are abruptly relaxed as DI beneficiaries age out of the DI program at their Full Retirement Age (FRA) and are automatically converted to the Old Age program.
  • The increase in labor supply is pronounced for DI beneficiaries with recent work activity, and is evident in terms of both labor force participation and earnings.
  • An increase in labor supply at the FRA is evident for beneficiaries with recent work activity in the six largest impairment categories, and particularly those with musculoskeletal or mental disorders.