Association for Public Policy Analysis & Management

Supplemental Security Income is a means-tested program that assists people with disabilities. In order to be eligible for SSI, applicants must have limited economic resources and must be determined by the Social Security Administration to be disabled. The SSA considers an adult to be disabled if she has a health impairment that prevents her from performing a substantial gainful activity. Individuals with health impairments but with relatively good health and/or earning potential are less likely to be deemed disabled by the SSA, and less likely to be eligible for benefits, than individuals with poorer health or lower earning potential. This research studies whether the SSI eligibility rules lead families of youth with disabilities to strategically modify their investments in their children's health and human capital so as to increase the youth's chances of SSI eligibility in adulthood. For this purpose I develop a two-period model to explore the dynamics of health and human capital investments of families who seek to secure the future eligibility of their children. Using data from the NLTS-2, I estimate a system of simultaneous equations for a family's labor supply and health and human capital investments which considers the probability of Adult-SSI participation. I find that when it is unclear whether a child will receive Adult-SSI benefits in the future, families are 21.39% less likely to invest in the human capital of their youth than when it is almost certain the youth will not receive benefits, and 14.02% less likely than those families whose predicted probability of benefits reception is almost one. These results suggest that some families choose to decrease human capital investments in order to increase their children's chances of being eligible for SSI as adults. I find no evidence of forgone health investments as a result of strategic behavior among these families.