Latent work disability and reporting bias

A measure of "true" disability is constructed as a continuous index of unob served work limitation using information front the Health and Retirement St udy Estimates front 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 co llar workers are found unlikely to overreport limitation. Use of a "biased" disability measure in the model lends to an upward-biased estimate of the effect of limitation on nonwork and to a downward-biased estimate of the ef fect of income.