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Approximations to the truth: comparing survey and microsimulation approaches to measuring income for social indicators

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  • Figari, Francesco
  • Iacovou, Maria
  • Skew, Alexandra J.
  • Sutherland, Holly

Abstract

This paper evaluates income distributions in four European countries (Austria, Italy, Spain and Hungary) using two complementary approaches: a standard approach based on reported incomes in survey data, and a microsimulation approach, where taxes and benefits are simulated. Given that benefit receipts tend to be under-reported in survey data, and over-estimated in microsimulation procedures, we may expect the two approaches to generate slightly different results. In fact, we find reasonably consistent results. To the extent that the results differ, we explore why these differences occur, and suggest directions for future research, where each approach may inform improvements in the other.

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File URL: https://www.iser.essex.ac.uk/publications/working-papers/euromod/em3-10.pdf
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Paper provided by EUROMOD at the Institute for Social and Economic Research in its series EUROMOD Working Papers with number EM3/10.

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Date of creation: 08 Jun 2010
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Publication status: published
Handle: RePEc:ese:emodwp:em3-10

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  1. Burkhauser, Richard V. & Feng, Shuaizhang & Jenkins, Stephen P. & Larrimore, Jeff, 2008. "Estimating Trends in US Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring," IZA Discussion Papers 3690, Institute for the Study of Labor (IZA).
  2. Bound, John & Brown, Charles & Mathiowetz, Nancy, 2001. "Measurement error in survey data," Handbook of Econometrics, Elsevier, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 59, pages 3705-3843 Elsevier.
  3. repec:ese:iserwp:2004-28 is not listed on IDEAS
  4. Sutherland, Holly & DeCoster, Andre & Matsaganis, Manos & Tsakloglou, Panos, 2009. "Accurate income measurement for the assessment of public policies: final report," EUROMOD Working Papers EM7/09, EUROMOD at the Institute for Social and Economic Research.
  5. Pudney, Stephen & Sutherland, Holly, 1994. "How reliable are microsimulation results? : An analysis of the role of sampling error in a U.K. tax-benefit model," Journal of Public Economics, Elsevier, Elsevier, vol. 53(3), pages 327-365, March.
  6. Lietz, Christine & Sutherland, Holly, 2005. "Social indicators and other income statistics using EUROMOD: an assessment of the 2001 Baseline and Changes 1998-2001," EUROMOD Working Papers EM6/05, EUROMOD at the Institute for Social and Economic Research.
  7. Figari, Francesco & Levy, Horacio & Sutherland, Holly, 2007. "Using the EU-SILC for policy simulation: prospects, some limitations and some suggestions," EUROMOD Working Papers EM1/07, EUROMOD at the Institute for Social and Economic Research.
  8. Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2009. "The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences," Working Papers, Harris School of Public Policy Studies, University of Chicago 0903, Harris School of Public Policy Studies, University of Chicago.
  9. Mantovani, Daniela & Sutherland, Holly, 2003. "Social indicators and other income statistics using the EUROMOD baseline: a comparison with Eurostat and National Statistics," EUROMOD Working Papers EM1/03, EUROMOD at the Institute for Social and Economic Research.
  10. Paulus, Alari & Cok, Mitja & Figari, Francesco & Hegedus, Péter & Kump, Nataša & Lelkes, Orsolya & Levy, Horacio & Lietz, Christine & Lupsik, Silja & Mantovani, Daniela & Morawski, Leszek & Suth, 2009. "The effects of taxes and benefits on income distribution in the enlarged EU," EUROMOD Working Papers EM8/09, EUROMOD at the Institute for Social and Economic Research.
  11. Carlo V Fiorio & Francesco D'Amuri, 2006. "Tax Evasion In Italy: An Analysis Using A Tax-Benefit Microsimulation Model," The IUP Journal of Public Finance, IUP Publications, vol. 0(2), pages 19-37, May.
  12. Christina Behrendt, 2002. "Do Income Surveys Overestimate Poverty in Western Europe? Evidence from a Comparison with Institutional Frameworks," Social Indicators Research, Springer, Springer, vol. 58(1), pages 429-440, June.
  13. Andrea Brandolini & Anthony B. Atkinson, 2001. "Promise and Pitfalls in the Use of "Secondary" Data-Sets: Income Inequality in OECD Countries As a Case Study," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 771-799, September.
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