The Impact of Disability Benefits on Labor Supply: Evidence for the VA’s Disability Compensation Program
We analyze the
labor market effects of
Department of Veterans Affairs’
Compensation (DC) program.
largely unstudied DC
health insurance to approximately
million veterans of military service
who have service-connected disabilities.
We study a unique policy change, the
2001 Agent Orange decision, which
eligibility for DC benefits to a broader set of covered conditions
in particular, type II
Vietnam veterans who had served
in-theater (with ‘Boots on the Ground’
Notably, the Agent Orange policy excluded Vietnam era veterans who did not serve in-theatre (‘Not
on Ground’ or NOG), thus allowing us to assess the causal effects of
DC eligibility by contrasting
the outcomes of BOG and NOG veterans.
Our results indicate that the policy-induced increase in
DC enrollment reduced labor force participation by 18 percentage points
enrolled in the DC program as a result of the policy change.
We also find evidence of program
spillovers, with DC recipients significantly more likely to qualify for Social Security Disability