Date of Award

May 2018

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Scott Drewianka

Committee Members

Scott Adams, John Heywood, Owen Thompson

Abstract

This dissertation consists of two essays on the relationship between individual demographic transitions, major life events that alter how an individual may be categorized by demographers, and financial wellbeing. Recent literature on Social Security Disability Insurance (SSDI) has reported an absence of substitution behavior between SSDI and other social insurance programs, which is unexpected considering the observed countercyclicality of SSDI awards. In the first chapter, I decompose the increase in the SSDI enrollment rate over the period surrounding the Great Recession, finding that 54.9% of the increase in the enrollment rate can be attributed to individuals who did not previously identify as disabled. I then address the often-discarded possibility that recessions are themselves disabling, discussing evidence that the incidence of disabling conditions increased over the recessionary period.

Many changes in divorce policy have been grounded in the concern that divorce may cause financial hardship, especially among divorced women. Indeed, there is a well-documented correlation between financial hardships and divorce, but the direction of causality remains unclear: it is easy to imagine that divorce causes hardship, that hardship raises the risk of divorce, or that other factors may produce both outcomes. In the second paper, I specify a model that nests all three possibilities and can be estimated using standard limited dependent variable and simultaneous equation methods. Using instruments that have been used in prior work, I estimate the model on data from the National Longitudinal Survey of Youth 1979 Cohort. After controlling for both selection and simultaneity, the structural estimates imply a clear causal structure: I find no evidence that hardship causes divorce, but the event of divorce decreases the income/needs ratio in divorced women’s households by approximately 0.32 standard deviations. However, further evidence indicates that the causal effect of the divorce itself is partially obscured by a negative association between hardship and the risk of divorce, which appears to owe to anticipatory responses in women’s labor supply. Accounting for those anticipatory responses also reveals a negative structural error correlation between divorce and the income/needs ratio, suggesting some unobserved factors may produce both divorce and hardship.

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