Tests two leading theories for why disability insurance (DI) applications rise during recessions — health shocks (recessions worsen health, pushing workers past the medical threshold) and opportunity costs (weak labor markets reduce the cost of DI's earnings restrictions) — using Health and Retirement Study (HRS) micro data on men aged 52–64 over 1992–2010. Both mechanisms are rejected empirically. The Great Recession's DI surge appears normal by within-state historical standards, and extended unemployment insurance (UI) benefits are proposed as a potential (untested) explanation.
"Neither mechanism appears to be the primary driver of the increase in disability applications in recessions."
The paper is important for ruling out two intuitive channels but is limited by the HRS sample (men only, near-retirement age) and by the lack of a clean instrument. The "both channels rejected" finding motivates the Carey et al. (2025) approach, which isolates the entry-cost channel via the age-50/55 grid rule discontinuity and finds it dominates overwhelmingly. The extended UI hypothesis left open here is addressed — and rejected — by Mueller Rothstein and von Wachter 2016 — Unemployment Insurance and Disability Insurance in the Great Recession.