Who is Screened Out? Application Costs and the Targeting of Disability Programs

The application process is critical to the targeting of disability programs because disability, relative to other tags, is difficult to observe and costly to verify. We study the effect of application costs on the targeting of disability programs using the closings of Social Security Administration field offices, which provide assistance with filing disability applications. Using administrative data from the Social Security Administration, we find that field office closings lead to large and persistent reductions in the number of disability recipients and reduce targeting efficiency based on current eligibility standards. The number of disability recipients declines by 13% in surrounding areas, with the largest effects for applicants with moderately severe conditions, low education levels, and low pre-application earnings. Evidence on channels suggests that most of the reduction in applications is attributable to increased congestion at neighboring offices rather than increased travel times or costs of information gathering