I am an associate professor of economics with tenure 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)
Name pronunciation: MAH-nuh-see desh-PAHN-day
Office: Saieh Hall for Economics 347
Email: mdeshpande [at] uchicago.edu
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)
[December 2022, Conditionally Accepted at American Economic Review]
Abstract: How does the expectation that a child will receive government benefits in adulthood affect parental investments in the child's human capital? In a simple economic model, expected future benefits decrease human capital investments through income and substitution effects. Experts we surveyed also predicted a large decrease. We test this prediction 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. Most 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 investments in children's human capital. This zero effect is precisely estimated, and we strongly reject the null hypothesis from our expert survey. Potential explanations include parents increasing their own work effort, non-financial goals influencing investment decisions, and the negative wealth shock of losing future benefits choking off some types of investment.
"Does Welfare Prevent Crime? The Criminal Justice Outcomes of Youth Removed from SSI" (with Michael G. Mueller-Smith)
Quarterly Journal of Economics 137(4), November 2022, 2263-2307
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.
"Beyond Health: Non-Health Risk and the Value of Disability Insurance" (with Lee M. Lockwood)
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.
"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.
"Disability and Distress: The Effect of Disability Programs on Financial Outcomes" (with Tal Gross and Yalun Su)
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.
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.
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.
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.
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)