Essays on the Effects of Assistance Programs for People with Disabilities
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Date
2018-06-13
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Johns Hopkins University
Abstract
This dissertation consists of three essays on the economic consequences of assistance programs for children and youth with disabilities. In these essays, I explore how the eligibility rules of these programs might affect the health and work experiences of young people with disabilities, how benefits reception affects parental behavior, and how some changes in the current implementation of these programs would improve the health and human capital of program participants.
I explore these questions through studying the Supplemental Security Income program. SSI protects people with disabilities and their families by providing a monthly cash transfer to participants. In order to receive benefits, individuals need to be disabled and to live in households with little or no income and/or financial resources. The size of the cash transfer depends on family income; in 2017 the maximum transfer was $735 a month. As of December 2015, SSI was serving 1,036,846 children with disabilities ages 6 to 17, with an average monthly payment of $643.06, representing approximately $6.7 billion in federal spending a year.
In the first chapter, "The Prospect of Adult-SSI Participation and Investments among Transition-Age Youth with Disabilities,'' I explore how the Adult-SSI eligibility requirements might affect the health and human capital of youth with disabilities. Adult-SSI eligibility requires individuals to have a health impairment that prevents them from performing well in the labor market. Under these requirements, adults with health impairments but with relatively good health and/or earning potential are less likely to be eligible for benefits than adults with poorer health or lower human capital. In this chapter I explore whether this requirement discourages families from improving the health and work opportunities of their children in order to secure their children's SSI eligibility during adulthood.
To test this, I develop a two-period model that studies the dynamics of health and human capital investments of families who seek to secure the future eligibility of their children. Based on the solution to this model and using data from students with disabilities, I estimate a system of simultaneous equations for a family's labor supply and health and human capital investments that considers the probability of Adult-SSI eligibility. I find that when it is unclear whether a child will receive Adult-SSI benefits in the future, families are less likely to invest in the human capital of their youth than when it is almost certain the youth will not receive benefits, and less likely than those families whose predicted probability of benefits reception is almost one. These results suggest that indeed, some families will decrease their human capital investments in order to increase their children's chances of being eligible for SSI as adults.
In the second chapter, "Parental Academic Involvement among Families of Children with Disabilities: Potential Benefits of Child-SSI Participation,'' I explore the effects that families participation in Child-SSI has on the level of Parental Academic Involvement of families of children with disabilities. In this chapter, I estimate that Child-SSI participation can increase the level of parental involvement at home by increasing in the frequency parents read to their children from three or more times a week to almost every day. Similarly, Child-SSI participation increases parental attendance at school meetings or events from one to two times a year to three to four times a year. These estimates are obtained using an instrumental variables approach in which a family's Child-SSI participation is instrumented by the ethnic composition of the child's school's student body and the proportion of students enrolled in the free lunch program.
The third and final chapter, "Contract Theory and Cash Transfer Programs to Improve Beneficiaries' Health and Human Capital: Effort vs. Outcome Observability,'' approaches the design of Conditional Cash Transfer programs from the perspective of contract theory. This chapter proposes a principal-agent model in which the authority (the principal) offers a CCT (contract) to the beneficiary (agent). The model assumes that the authority's objective is to secure high levels of health or human capital for beneficiaries, knowing that these outcomes depend on both the beneficiary's effort and a random component not observed by the authority. Program participants derive utility from their own health and human capital and cash transfers; however, exerting effort is costly to them. Depending on the observability of effort and outcomes, we define optimal CCT's that reward the beneficiaries based either on the amount of effort he or she puts into achieving the desired outcomes, or on the individual's actual outcome. The model is then calibrated using data of students with disabilities who received benefits from the Child-SSI program. Through numerical simulations it is estimated that a CCT that conditions cash transfers to a certain level of effort would increase families' health and human capital investments, and that these higher effort levels would result in an increase in the overall health of beneficiaries' children with disabilities.
Primary Reader: Robert A. Moffitt
Secondary Reader: Antonio J. Trujillo
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Keywords
Disabilities, Labor Economics, Human Capital, Health Economics, Welfare