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Disability Insurance: Applications, Awards, and Lifetime Opportunity Costs

Brent Kreider

Journal of Labor Economics (JOLE), October 1999, 784-827

This paper provides new evidence about the impact of Social Security Disability Insurance on male
labor force participation decisions based on estimates from a structural model of applications, awards,
and state-contingent lifetime income flows. The lifetime framework makes it possible to consider long-
term opportunity costs associated with early labor force withdrawal and the disincentive to applications
resulting from the statutory waiting period before benefits may be received. Estimation techniques
account for the self-selected nature of the pool of applicants when predicting the individual-specific
probability of acceptance and the opportunity costs of applying.