Benefit generosity, application costs, and moral hazard

Abstract

This paper examines how differences in Supplemental Security Income (SSI) generosity, driven by differences in state SSI supplements, affect people's interaction with the program. This paper uses county-level administrative data on SSI recipiency rates, as well as county-level data on SSI application rates, SSI award rates, group specific employment rates, earnings, and migration rates to understand how SSI benefit generosity affects participation in the program as well as flows into and out of the program. To identify the causal effect of SSI generosity on program participation, this paper uses a border discontinuity design and exploits differences over time in the maximum benefit levels between neighboring counties.