Using Panel Data to Exactly Estimate Under-Reporting by the Self-Employed
AbstractThe income of the self-employed is often assumed to be understated in economic statistics. Debate exists about the extent of under-reporting and the resulting measures of the size of the underground economy. This paper refines a method developed by Pissarides and Weber (1989) and uses discrepancies between food shares and reported incomes to estimate under-reporting by the self-employed. In contrast to previous studies our panel data methodology distinguishes income under-reporting from transitory income fluctuations of the self-employed, and provides an exact estimate of the degree of under-reporting rather than just an interval estimate. Using panel data from Korea and Russia we estimate that 38 percent of the income of self-employed households in Korea and 47 percent of the income of Russian self-employed households is not reported.
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Bibliographic InfoPaper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 08/15.
Length: 21 pages
Date of creation: 06 Oct 2008
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Engle curve; measurement error; self-employment; underground economy;
Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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