NBER WORKING PAPER SERIES

HOW LARGE IS THE BIAS IN SELF-REPORTED DISABILITY?

Hugo Benítez-SilvaMoshe Buchinsky

Hiu Man ChanSofia Cheidvasser

John Rust

Working Paper 7526http://www.nber.org/papers/w7526

NATIONAL BUREAU OF ECONOMIC RESEARCH1050 Massachusetts Avenue

Cambridge, MA 02138February 2000

This work is made possible by research support from NIH grant AG12985-02. Benítez-Siva is also grateful for thefinancial support of the “la Caixa Fellowship Program” in the early stages of this research. Buchinsky is grateful for thesupport from the Alfred P. Sloan Research Fellowship. We have benefited from feedback from participants of a CowlesFoundation Seminar, the NBER Summer Institute, the Hebew University of Jerusalem, comments by Franco Peracchiat the Conference on Reform of Social Security Organized by the Fundación BBV in Madrid, and from the very ableresearch assistance of Paul Mishkin. We thank Joe Heckendorn, Dave Howell, Cathy Leibowitz and other members ofthe staff of the University of Michigan Survey Research Center (SRC) and the Health and Retirement Survey staff foranswering numerous questions about the data providing us with data from the wave three alpha versions of the HRS.The views expressed herein are those of the authors and are not necessarily those of the National Bureau of EconomicResearch.

© 2000 by Hugo Benítex-Silva, Moshe Buchinsky, Hiu Man Chan, Sofia Cheidvasser, and John Rust. All rightsreserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided thatfull credit, including © notice, is given to the source.

How Large is the Bias in Self-Reported Disability?Hugo Benítez-Silva, Moshe Buchinsky, Hiu Man Chan, Sofia Cheidvasser, and John RustNBER Working Paper No. 7526February 2000JEL No. H5

ABSTRACT

A pervasive concern with the use of self-reported health and disability measures in behavioralmodels is that they are biased and endogenous. A commonly suggested explanation is that surveyrespondents exaggerate the severity of health problems and incidence of disabilities in order torationalize labor force non-participation, application for disability benefits and/or receipt of thosebenefits. This paper re-examines this issue using a self-reported indicator of disability status fromthe Health and Retirement Survey. Using a bivariate probit model we test and are unable to rejectthe hypothesis that the self-reported disability measure is an exogenous explanatory variable in amodel of individual’s decision to apply for DI benefits or Social Security Administration’s decisionto award benefits. We further study a subsample of individuals who applied for Disability Insuranceand Supplemental Security Income benefits from the Social Security Administration (SSA) forwhom we can also observe SSA’s award/deny decision. For this subsample we test and are unableto reject the hypothesis that self-reported disability is health and socio-economic characteristicssimilar to the information used by the SSA in making its award decisions. The unbiasednessrestriction 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 inanonymous surveys such as the HRS. Indeed, our results are consistent with the hypothesis thatdisability applicants are aware of the criteria and decision rules that SSA uses in making awards andact as if they were applying these same criteria and rules when reporting their own disability status.

Hugo Benítez-Silva Moshe BuchinskyYale University Department of Economics

Brown UniversityHiu Man Chan Box BYale University Providence, RI 02912

And CREST-INSEESofia Cheidvasser moshe_buchinsky@brown.eduYale University

John RustDepartment of EconomicsYale UniversityBox 208264New Haven, CT 06520-8264and NBERjohn.rust@yale.edu