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Consumption Imputation Errors in Administrative Data

Author

Listed:
  • Scott R Baker
  • Lorenz Kueng
  • Steffen Meyer
  • Michaela Pagel

Abstract

Many research papers in household finance utilize annual snapshots of household wealth from administrative data, such as tax registries, to calculate “imputed consumption.” However, trading costs, unobserved intrayear trades, or unobserved security characteristics may cause measurement error. We document how such errors vary across groups of individuals by income, portfolio characteristics, and wealth and how they are correlated with individual income and balance sheets, asset prices, and the business cycle using transaction-level retail brokerage account data. We find that the economic significance of imputation error is small in many research settings, and we discuss robustness checks and econometric specifications to minimize the impact of imputation error in future research.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Scott R Baker & Lorenz Kueng & Steffen Meyer & Michaela Pagel, 2022. "Consumption Imputation Errors in Administrative Data," The Review of Financial Studies, Society for Financial Studies, vol. 35(6), pages 3021-3059.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:6:p:3021-3059.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab087
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    More about this item

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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