Self Reported Disability and Reference Groups

Individuals are influenced by the types of people with whom they associate and who form their social networks. These social interactions may affect individual and social norms. We develop a direct test of this using Dutch survey data on how respondents evaluate work disability of hypothetical people with some work related health problem (vignettes). We analyze how the thresholds respondents use to decide what constitutes a (mild or more serious) work disability depends on the number of people receiving disability insurance benefits (DI) in their reference group. To account for endogeneity of DI receipt in a respondent's reference group, we jointly model the respondent's own self-reported work disability, the evaluation thresholds, and DI receipt in the reference group. We find that reference group effects are significant, and contribute substantially to an explanation of why self-reported work disability in the Netherlands is much higher than in, e.g., the US. This implies an important role for social interactions and norms on the perception of work limitations