Partial Benefits in the Social Security Disability Insurance Program

The current U.S. Social Security Disability Insurance program is an all-or-nothing system that has been criticized for creating strong work disincentives. In an empirically grounded and calibrated life-cycle model, I simulate behavioral responses to a partial disability benefit system, a policy alternative to the current program, which allows individuals to claim partial disability and combine earnings with disability benefits. Simulation results show financial savings for the program as well as welfare improvements for individuals with disabilities.