Factors affecting initial disability allowance rates for the Disability Insurance and Supplemental Security Income programs: the role of the demographic and diagnostic composition of applicants and local labor market conditions.

Various factors outside the control of decision makers may affect the rate at which disability applications are allowed or denied during the initial step of eligibility determination in the Social Security Disability Insurance (DI) and Supplemental Security Income (SSI) programs. In this article, using individual-level data on applications, I estimate the role of three important factors--the demographic characteristics of applicants, the diagnostic mix of applicants, and the local unemployment rate--in affecting the probability of an initial allowance and state allowance rates. I use a random sample of initial determinations from 1993 through 2008 and a fixed-effects multiple regression framework. The empirical results show that the demographic and diagnostic characteristics of applicants and the local unemployment rate substantially affect the initial allowance rate. An increase in the local unemployment rate tends to be associated with a decrease in the initial allowance rate. This negative relationship holds for adult DI and SSI applicants and for SSI childhood applicants.