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Latent Work Disability and Reporting Bias

Brent Kreider

Journal of Human Resources (JHR), Fall 1999, 734-769

A measure of "true" disability is constructed as a continuous index of unobserved work limitation
using information from the Health and Retirement Study. Estimates from a simultaneous model of
work participation, disability, and income flows suggest that nonworkers tend to substantially
overreport limitation, with overreporting most prevalent among nonworking women, high school
dropouts, nonwhites, and former blue collar workers. Former white collar workers are found unlikely
to overreport limitation. Use of a "biased" disability measure in the model leads to an upward-biased
estimate of the effect of limitation on nonwork and to a downward-biased estimate of the effect of income.