The Effect of Lower Transaction Costs on Social Security Disability Insurance Application Rates and Participation
Jan 23, 2019
Transaction costs pose significant barriers to participation in public programs. We analyze how Social Security Disability Insurance (SSDI) application behavior was affected by iClaim, a 2009 innovation that streamlined the online application process. We use a difference-in-differences design to compare application rates before and after 2009 across counties with varying degrees of access to high-speed internet. We estimate that counties with internet connectivity one standard-deviation above the mean experienced a 1.8 percent increase in SSDI applications, and a 3.3 percent increase in appeals after the reform. We estimate that the increase in applications accounts for 7.5 percent of the overall increase in applications over the time frame in our analysis. Higher exposure to the online application led to a slightly larger increase in SSDI awards, meaning there was a small but significant increase in the overall award rate. Application rates increased the most in rural areas, while appeals and awards had more significant increases in urban areas. These results suggest that the online application reduced transaction costs on applicants, and the lower costs improved the overall targeting efficiency of the application process.