How Disability Benefits in Early Life Affect Adult Outcomes

Abstract
We use three sources of variation in childhood SSI receipt to identify the effects of receiving Supplemental Security Income (SSI) in childhood on adult outcomes and to estimate a model of human capital development. Using a novel data linkage procedure in Social Security Administration (SSA) data, we identify siblings of children receiving SSI, who help to isolate the income effects of SSI separately from potential perverse incentive effects created by the program's rules. We find that the effects of SSI depend crucially on parental labor supply responses: SSI has positive effects on children when parents do not adjust their labor supply in response to SSI income, but zero or negative effects on children when parents reduce their earnings in response to SSI income. We estimate a model of maternal labor supply and child human capital formation to formally decompose the effect of SSI into channels and quantify the relative importance of those channels. Our findings indicate that 1) the income effects of SSI on children's human capital are substantial, while the perverse incentive effects are relatively small, and 2) parent work on net improves children's outcomes by increasing household consumption, despite the potential decrease in parental time. Joint paper with Alessandra Voena and Jason Weitze.