Option Value and Dynamic Programming Model Estimates of Social Security Disability Insurance Application Timing

TitleOption Value and Dynamic Programming Model Estimates of Social Security Disability Insurance Application Timing
Publication TypeReport
Year of Publication2003
AuthorsBurkhauser, RV, Butler, JS, Gumus, G
InstitutionInstitute for the Study of Labor (IZA), Bonn
Call Numberwp_2003/Burkhauser_etal_IZAdp941.pdf
KeywordsSocial Security
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.

Notes

RDA 1996-002

URLhttp://www.iza.org/
Endnote Keywords

Social Security Disability Insurance

Endnote ID

13602

Citation Key5528