David Autor, MIT and NBER Nicole Maestas, RAND Kathleen Mullen, RAND Alexander Strand, SSA

1. CENTER forDISABILITY RESEARCH Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation of Disability Applicants David Autor, MIT and NBER Nicole Maestas, RAND Kathleen Mullen, RAND Alexander Strand, SSA Retirement Research Consortium Annual Conference August 2012 MRRC (SSA) funding gratefully acknowledged (UM11-01)

2. Disability and labor supply • Large body of research studies effects of DI receipt on labor supply, but ignores role of application process • DI applicants spend months or years seeking benefits • If employment potential deteriorates while out of labor force, then their subsequent LFP understates employability at time of application • This has implications for total cost of DI program and previous estimates of receipt effect

3. Our contribution • This paper tests whether the duration of the DI application process—waiting time—causally affects subsequent employment • Since waiting times are likely to be (negatively) correlated with unobserved severity, we use an IV strategy • We exploit variation in applicant waiting times resulting from variation in average initial processing times of disability examiners

4. DI application process 4

5. Data • Disability Operational Data Store (DIODS) • Administrative database linking applicant-examiner • Universe of initial applications decided in 2005, recon decisions in 2005-2006 • Link to other administrative databases to obtain ultimate outcomes and decision dates through 2010 (CPMS, PHUS, MBR) • Link to Detailed Earnings Record (DER) to construct labor supply measures • Uncapped earnings (Medicare box on W-2)

6. Summary statistics 37% musculoskeletal 22% mental Mean age 47 years Mean earnings $22K 6

7. Summary statistics • Two-thirds of applicants awarded benefits within 5 years of application • 50% of awards made on appeal

8. Empirical strategy Two key assumptions: • Conditional random assignment of examiners to applicants • Monotonicity • Holding case characteristics constant, some examiners faster than others • Cases processed by “fast” examiners would take longer if processed by “slow” examiners, and vice versa

9. Estimated Examiner-Specific Processing Times

10. First stage results

11. Reduced form results

12. Can we interpret causally? • Our reduced form estimate is a causal effect of examiner speed on LFP • To interpret as casual effect of waiting time on LFP: • Requires: EXTIME only affects LFP through waiting time • In the paper we show that EXTIME is • Uncorrelated with initial decision, but • Slightly correlated with probability of appeal, and eventual DI receipt • We can interpret as causal effect of waiting time only for initially allowed • For other groups, multiple channels operative: • Most important: EXTIME ➞Pr[appeal]➞Pr[award]

13. Effect of waiting time on employment

14. Limitations and next steps • Not clear if results generalizable beyond initially allowed • DI beneficiaries obviously face different work incentives than denied applicants • Need an instrument for DI receipt… • We have one! • Build on Maestas, Mullen and Strand (2011): • Use examiner allowance propensities to instrument for receipt

15. Summary of findings • We find that examiner processing times are negatively correlated with applicants’ subsequent employment • Causally, we can attribute lower employment to longer processing times for initially allowed applicants • A one standard deviation (2.4 month) increase in initial processing times reduces subsequent employment rates by ~1 pp • Extrapolating to average total processing times, this implies the DI application process reduces employment prospects by ~5 pp (17%)

16. CENTER forDISABILITY RESEARCH

17. Overview of databases 17