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How Large is the Bias in Self-Reported Disability?

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Abstract

A pervasive concern with the use of self-reported health and disability measures in behavioral models is that they are biased and endogenous. A commonly suggested explanation is that survey respondents exaggerate the severity of health problems and incidence of disabilities in order to rationalize labor force non-participation, application for disability benefits and/or receipt of those benefits. This paper re-examines this issue using a self-reported indicator of disability status from the Health and Retirement Survey. Using a bivariate probit model we test and are unable to reject the hypothesis that the self-reported disability measure is an exogenous explanatory variable in a model of individual's decision to apply for DI benefits or Social Security Administration's decision to award benefits. We further study a subsample of individuals who applied for Disability Insurance and Supplemental Security Income benefits from the Social Security Administration (SSA) for whom we can also observe SSA's award/deny decision. For this subsample we test and are unable to reject the hypothesis that self-reported disability is health and socio-economic characteristics similar to the information used by the SSA in making its award decisions. The unbiasedness restriction implies that these two variables have the same conditional probability distributions. Thus, our results indicate that disability applicant do not exaggerate their disability status at least in anonymous surveys such as the HRS. Indeed, our results are consistent with the hypothesis that disability applicants are aware of the criteria and decision rules that SSA uses in making awards and act as if they were applying these same criteria and rules when reporting their own disability status.

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Paper provided by Brown University, Department of Economics in its series Working Papers with number 2000-01.

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Date of creation: 2000
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Handle: RePEc:bro:econwp:2000-01

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Postal: Department of Economics, Brown University, Providence, RI 02912

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  1. Bierens, H.J., 1989. "A consistent conditional moment test of functional form," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0064, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  2. Hugo Benitez-Silva & Moshe Buchinsky & Hiu Man Chan & Sofia Cheidvasser & John Rust, 2000. "How Large is the Bias in Self-Reported Disability?," Working Papers, Brown University, Department of Economics 2000-01, Brown University, Department of Economics.
  3. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, Econometric Society, vol. 65(4), pages 781-832, July.
  4. Donald W. K. Andrews & Moshe Buchinsky, 2000. "A Three-Step Method for Choosing the Number of Bootstrap Repetitions," Econometrica, Econometric Society, Econometric Society, vol. 68(1), pages 23-52, January.
  5. Debra S. Dwyer & Olivia S. Mitchell, . "Health Problems as Determinants of Retirement: Are Self-Rated Measures Endogenous?," Pension Research Council Working Papers, Wharton School Pension Research Council, University of Pennsylvania 98-7, Wharton School Pension Research Council, University of Pennsylvania.
  6. Jianting Hu & Kajal Lahiri & Denton R. Vaughan & Bernard Wixon, 2001. "A Structural Model Of Social Security'S Disability Determination Process," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 348-361, May.
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