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Title:Option value and dynamic programming model estimates of social security disability insurance application timing PDF Logo
Authors:Burkhauser, Richard V.
Butler, J. S.
Gumus, Gulcin
Issue Date:2003
Series/Report no.:IZA Discussion paper series 941
Abstract:This paper develops dynamic structural models - an option value model and a dynamic programming model - of the Social Security Disability Insurance (SSDI) application timing decision. We estimate the time to application from the point at which a health condition first begins to affect the kind or amount of work that a currently employed person can do. We use Health and Retirement Study (HRS) and restricted access Social Security earnings data for estimation. Based on tests of both in-sample and out-of-sample predictive accuracy, our option value model performs better than both our dynamic programming model and our reduced form hazard model.
Subjects:Social Security Disability Insurance
Health and Retirement Survey
option value
dynamic programming
JEL:H55
H31
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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