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S K O O B E T O The Political Economy of the Disability Insurance. Theory and Evidence of Gubernatorial Learning N from Social Security Administration Monitoring O T Radha Iyengar R Giovanni Mastrobuoni E B L A O L R A C Working Paper No. 70 March 2008 (Revised, October 2010) E H T The Political Economy of the Disability Insurance. Theory and Evidence of Gubernatorial Learning from Social Security Administration Monitoring Radha Iyengar∗ Giovanni Mastrobuoni† October 2010 Abstract The dramatic rise in the disability insurance (DI) roles in the last 20 years has been the subject of much controversy in both popular and academic circles. While, the relationship between DI and labor force participation has been the subject of a growing literature, the mechanism of this transition from employment to DI remains unclear. We hypothesize that one mechanism is the state-level adminis- tration of the program which creates a classic principal-agent problem. This paper analyzes the impact of continuing conflict of interests for Disability Determination Services agencies—between Social Security Administration standards and state gu- bernatorial political interests—interacted with the increased demand for disability insurance as an alternative for low-skilled works during the period of 1982 to 2000. We find evidence that multi-term governors