The Disability Screening Process and the Labor Market Behavior of Accepted and Rejected Applicants: Evidence from the Health and Retirement Study

This paper uses Social Security earnings records linked to data from the Health and Retirement Study to examine the labor market behavior of rejected and accepted disability applicants prior to their application. We find that rejected applicants have substantially lower earnings and labor force participation rates during the decade prior to application than beneficiaries. Also, we find some evidence of a divergence between these groups, with rejected applicants leaving the labor force at a faster rate than beneficiaries as their application date approaches. One interpretation of these results is that the disability screening process on average separates those who are at least partially motivated by adverse economic circumstances when applying for disability benefits from other applicants.