Self reported disability and reference groups

Individuals are ináuenced by the types of people with whom they associate and who form their social networks. These social interactions may a§ect 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 depend on the number of people receiving disability insurance beneÖts (DI) in their reference group. To account for endogeneity of DI receipt in a respondentís reference group, we jointly model the respondentís own self-reported work disability, the evaluation thresholds, and DI receipt in the reference group. We Önd that reference group e§ects are signiÖcant, 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.