by Stephan Linder

In this study, I examine the timing of disability insurance application by unemployed, health-impaired workers. In a dynamic model of job search and disability insurance application, I show how economic and institutional factors, such as unemployment benefits or the application success rate, may affect the decision to apply for disability insurance. Two results are especially noteworthy. First, a longer expected waiting time between application and first benefits receipt induces unemployed workers to apply earlier during the unemployment spell. Second, the length of unemployment benefits may affect the timing of disability insurance application. Specifically, I argue that workers are more likely to apply for disability insurance as unemployment benefits run out.

In the empirical section of the study, I want to use various Surveys of Income and Program Participation (SIPP) in order to construct longitudinal data of unemployment spells for people with work-limiting health impairments. The data will be linked to records on disability insurance application and determinations provided by the Social Security Administration. I plan to estimate various hazard models in order to test theoretical predictions from the first section of the study. Starting with a proportional single-hazard model, I will consider the following refinements: (i) selection issues regarding observed application success and waiting time; (ii) effects of heterogeneity in
expected waiting time on the baseline hazard; and (iii) competing risk specifications of disability insurance application and re-employment.