Uses multiple Health and Retirement Study (HRS) waves (ages 55–61, 2000–2012) to decompose the 30% rise in disability insurance (DI) applications during the Great Recession (GR). The entire application increase is concentrated among individuals with functional limitations (FL); those without FL show no recession-induced rise. FL prevalence does not change over the business cycle, so it is the conditional application rate among FL workers that rises. A cohort analysis confirms the recession accelerated DI application among workers who developed new FL, without causing earlier labor market exit — implying recession-induced entry is a timing effect on an already-eligible population, not new disability creation.
"Disability insurance is a more important, and more often exercised choice for workers during recessions, even though their patterns of work and earnings look remarkably similar across cohorts."
The FL-conditionality finding is the key empirical advance over Cutler et al. (2012): it narrows the puzzle to a specific population (workers already on the disability margin) and to a specific mechanism (something lowers their threshold for applying). The paper cannot cleanly separate entry costs from health shocks within the FL group, but it rules out the "new disability" interpretation. Carey Miller and Molitor 2025 — Why Does Disability Increase During Recessions Evidence from Medicare resolves the remaining ambiguity by showing that recession-induced entrants are healthier, not sicker, decisively ruling out health shocks.