How large is the bias in self-reported disability?

A pervasive concern with the use of self-reported health measures in behavioural models is that individuals tend to exaggerate the severity of health problems in order to rationalize their decisions regarding labour force participation, application for disability benefits, etc. We re-examine this issue using a self-reported indicator of disability status from the Health and Retirement Study. We study a subsample of individuals who applied for disability benefits from the Social Security Administration (SSA), for whom we can also observe the SSA's decision. Using a battery of tests, we are unable to reject the hypothesis that self-reported disability is an unbiased indicator of the SSA's decision.