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Errors in self-reported earnings: The role of previous earnings volatility and individual characteristics

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  • Akee, Randall

Abstract

I report the measurement error in self-reported earnings for a developing country using a novel data set. The data set consists of two cross-sections of the Federated States of Micronesia (FSM) wage and salary sectors; additionally, a subset of the two cross-sections may be linked to create a panel. Administrative data from FSM Social Security office are matched to the FSM Census data for the wage and salary sectors. I find that the error in annual self-reported earnings is centered on zero. Additionally, I find strong evidence for mean reversion in the data suggesting non-classical measurement error. I identify the impact of prior years' earnings variability on the current reporting of earnings using administrative data on earnings histories. Prior earnings volatility strongly affects measurement error in current period. However, the effect of prior shocks diminish significantly over time--suggesting that first-differencing and fixed-effects techniques will not improve accuracy.

Suggested Citation

  • Akee, Randall, 2011. "Errors in self-reported earnings: The role of previous earnings volatility and individual characteristics," Journal of Development Economics, Elsevier, vol. 96(2), pages 409-421, November.
  • Handle: RePEc:eee:deveco:v:96:y:2011:i:2:p:409-421
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    References listed on IDEAS

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    Cited by:

    1. Randall Akee, Devesh Kapur, 2012. "Remittances and Rashomon- Working Paper 285," Working Papers 285, Center for Global Development.
    2. de Nicola, Francesca & Giné, Xavier, 2014. "How accurate are recall data? Evidence from coastal India," Journal of Development Economics, Elsevier, vol. 106(C), pages 52-65.
    3. Asian Development Bank Institute, 2017. "Risk Financing for Rural Climate Resilience in the Greater Mekong Subregion," Working Papers id:11761, eSocialSciences.
    4. Suziedelyte, Agne & Johar, Meliyanni, 2013. "Can you trust survey responses? Evidence using objective health measures," Economics Letters, Elsevier, vol. 121(2), pages 163-166.
    5. Van-Ha Le & Jakob de Haan & Erik Dietzenbacher, 2013. "Do Higher Government Wages Reduce Corruption? Evidence Based on a Novel Dataset," CESifo Working Paper Series 4254, CESifo Group Munich.

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