Manasi Deshpande

I am an assistant professor of economics at the Kenneth C. Griffin Department of Economics, University of Chicago.

My research areas are empirical public finance and labor economics, with a focus on the effects of social insurance and public assistance programs and their interaction with labor markets.


Curriculum Vitae (pdf)

Office: Saieh Hall for Economics 347

Phone: 773-795-2944

Email: mdeshpande [at] uchicago.edu

Address:

Department of Economics

University of Chicago

1126 E. 59th Street

Chicago, IL 60637

Publications and Working Papers

"The (Lack of) Anticipatory Effects of the Social Safety Net on Human Capital Investment" (with Rebecca Dizon-Ross)

[June 2022, Email for draft (under agency review)]

Abstract: How does the expectation of government benefits in adulthood affect human capital investments in childhood? Both economic theory and the experts we surveyed predict that expected future benefits decrease childhood human capital investments through income and incentive effects. We investigate whether this is true by conducting a randomized controlled trial with families of children who receive Supplemental Security Income (SSI), a cash welfare program for children and adults with disabilities. The vast majority of parents whose children receive SSI overestimate the likelihood that their child will receive SSI benefits in adulthood. We provide randomly-selected families with information on the predicted likelihood that their child will receive SSI benefits in adulthood and use this randomized information shock to identify the effect of expectations about future benefits. We find that reducing the expectation that children will receive benefits in adulthood does not increase parental investments in children's human capital. This zero effect is precisely estimated, and we strongly reject the positive null hypothesis from our expert survey. Reducing the expectation that children will receive benefits in adulthood instead increases parents' planned labor market effort.

Treatment video Control (History) video Control (Geography) video

[February 2022, Forthcoming in Quarterly Journal of Economics]

Abstract: We estimate the effect of losing Supplemental Security Income (SSI) benefits at age 18 on criminal justice and employment outcomes over the next two decades. To estimate this effect, we use a regression discontinuity design in the likelihood of being reviewed for SSI eligibility at age 18 created by the 1996 welfare reform law. We evaluate this natural experiment with Social Security Administration data linked to records from the Criminal Justice Administrative Records System. We find that SSI removal increases the number of criminal charges by a statistically significant 20% over the next two decades. The increase in charges is concentrated in offenses for which income generation is a primary motivation (60% increase), especially theft, burglary, fraud/forgery, and prostitution. In response to SSI removal, youth are twice as likely to be charged with an illicit income-generating offense than they are to maintain steady employment at $15,000/year in the labor market. As a result of these charges, the annual likelihood of incarceration increases by a statistically significant 60% in the two decades following SSI removal. The costs of enforcement and incarceration from SSI removal are so high that they nearly eliminate the savings from reduced SSI benefits.

VoxEU article LSE American Politics and Policy blog Inquest article Probable Causation podcast

Econometrica 90(4), July 2022, pp. 1781-1810

Abstract: The public debate over disability insurance has centered on concerns about individuals without severe health conditions receiving benefits. We go beyond health risk alone to quantify the overall insurance value of U.S. disability programs, including value from insuring non-health risk. We find that disability recipients, especially those with less-severe health conditions, are much more likely to have experienced a wide variety of non-health shocks than non-recipients. Selection into disability receipt on the basis of non-health shocks is so strong among individuals with less-severe health conditions that by many measures less-severe recipients are worse off than more-severe recipients. As a result, under baseline assumptions, benefits to less-severe recipients have an annual surplus value (insurance benefit less efficiency cost) over cost-equivalent tax cuts of $7,700 per recipient, about three-fourths that of benefits to more-severe recipients ($9,900). Insurance against non-health risk accounts for about one-half of the value of U.S. disability programs.

Online Appendix and Supplemental Materials

"How Sticky Is Retirement Behavior in the U.S.?" (with Itzik Fadlon and Colin Gray)

[August 2021, Forthcoming in Review of Economics and Statistics]

Abstract: We study how increases in the U.S. Social Security full retirement age (FRA) affect benefit claiming behavior and retirement (workforce exit) behavior, and in particular how these two behaviors differ in their responses to FRA increases. Using a long panel of Social Security administrative data, we implement complementary research designs of a traditional cohort analysis and a regression-discontinuity design. We find that while claiming ages strongly and immediately shift in response to increases in the FRA, retirement ages exhibit persistent "stickiness" at the old FRA of 65. We use several strategies to explore the likely mechanisms behind the stickiness in retirement, and we find suggestive evidence that employers play a role in workers' responses to the FRA.

[December 2020, NBER RDRC Working Paper]

Abstract: The debate over the Supplemental Security Income program for children reflects a key tradeoff in welfare programs: transfers to disadvantaged households could promote children's human capital development by increasing household resources, but conditioning those transfers on child health and family income could potentially discourage human capital development by creating perverse incentives. In this paper, I use two regression discontinuity designs (RDD) paired with Social Security administrative data to estimate the net effect of receiving SSI in childhood on adult earnings and to separately identify the household resources channel and perverse incentives channels. Using the first RDD, I find that removing children from SSI has a statistically insignificant net effect on child earnings in adulthood. Using the second RDD and a novel data linkage procedure to identify younger siblings in SSA administrative data, I find that removing youth from SSI at the age of 18 reduces the adult earnings of their younger siblings by about $5,000 annually. This finding suggests that SSI's household resources channel has a large positive effect on children's human capital development. I develop a decomposition procedure to determine the relative contributions of the income transfer and the perverse incentives channels to the net effect of SSI.

American Economic Journal: Applied 13(2), April 2021, pp. 151-78

Abstract: We provide the first evidence on the relationship between disability programs and markers of financial distress: bankruptcy, foreclosure, eviction, and home sale. Rates of these adverse financial events peak around the time of disability application. Using variation induced by an age-based eligibility rule, we find that disability allowance reduces the likelihood of bankruptcy (0.77 percentage point or 31 percent), foreclosure (1.8 percentage point or 34 percent), and home sale (1.8 percentage point or 15 percent). We present evidence that these changes reflect true reductions in financial distress. Considering these extreme events increases the optimal disability benefit amount and suggests a shorter optimal waiting time.

Online Appendix

American Economic Journal: Economic Policy 11(4), November 2019, pp. 213-48

Winner of 2020 AEJ: Economic Policy Best Paper Award

Abstract: 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. 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 16% in surrounding areas, with the largest effects for applicants with moderately severe conditions and low education levels. Evidence on channels suggests that increased congestion at neighboring offices is more important than higher travel or information costs.

Online Appendix Field office closing data New York Times coverage

American Economic Review 106(11), November 2016, pp. 3300-3330

Winner of 2015 APPAM Dissertation Award, 2015 Upjohn Institute Dissertation Award, and 2016 NASI John Heinz Dissertation Award

Abstract: I estimate the effects of removing low-income youth with disabilities from Supplemental Security Income (SSI) on their earnings and income in adulthood. Using a regression discontinuity design based on a 1996 policy change in age 18 medical reviews, I find that youth who are removed from SSI at age 18 recover one-third of the lost SSI cash income in earnings. SSI youth who are removed and stay off SSI earn on average $4,400 annually, and they lose $76,000 in present discounted observed income over the 16 years following removal relative to those who do not receive a review.

Online Appendix

Washington Post coverage AEA feature Microeconomic Insights feature

Review of Economics and Statistics 98(4), October 2016, pp. 638-654

Abstract: I estimate the effect of removing children with disabilities from Supplemental Security Income (SSI) on parents earnings and household disability receipt. Using administrative data from the Social Security Administration, I implement regression discontinuity and difference-in-differences designs based on changes in the budget for child medical reviews. I find that parents fully offset the SSI loss with increased earnings, and the loss of the child's SSI payment reduces disability applications by parents and siblings. I model and test alternative hypotheses for the large parental earnings response and find suggestive evidence that the response is driven primarily by an income effect.

Online Appendix

Research in Progress

"The Effects and Channels of Early-Life Removal from Disability Insurance: Evidence from Supplemental Security Income Children" (with Alessandra Voena and Jason Weitze)