IDEAS home Printed from https://ideas.repec.org/p/fip/fedmsr/568.html
   My bibliography  Save this paper

What Do Survey Data Tell Us about U.S. Businesses?

Author

Listed:
  • Anmol Bhandari
  • Serdar Birinci
  • Ellen R. McGrattan
  • Kurt See

Abstract

This paper examines the reliability of survey data for research on pass-through businesses activities. Passthrough businesses account for over half of all net income to businesses in the United States and most of the rise in top income shares. We examine all surveys that ask questions about these businesses and compare outcomes across surveys and with aggregated administrative data. We document large inconsistencies in business incomes, receipts, and number of returns. We highlight problems due to non-representative samples and measurement errors. Non-representativeness is reflected in undersampling of businesses, especially in categories of owners with low total incomes. Measurement errors arise because respondents do not refer to relevant documents when answering survey questions and also because some questions are framed in a manner that is confusing to respondents. Finally, we discuss measurement issues for statistics of interest, such as returns and valuations of ongoing private businesses, that are inherently latent and cannot be recovered using either survey or administrative data.

Suggested Citation

  • Anmol Bhandari & Serdar Birinci & Ellen R. McGrattan & Kurt See, 2018. "What Do Survey Data Tell Us about U.S. Businesses?," Staff Report 568, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmsr:568
    DOI: 10.21034/sr.568
    as

    Download full text from publisher

    File URL: https://minneapolisfed.org/research/sr/sr568.pdf
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Marco Cagetti & Mariacristina De Nardi, 2006. "Entrepreneurship, Frictions, and Wealth," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 835-870, October.
    2. Ayse Imrohoroglu & Cagri S. Kumru & Arm Nakornthab, 2018. "Revisiting Tax on Top Income," ANU Working Papers in Economics and Econometrics 2018-660, Australian National University, College of Business and Economics, School of Economics.
    3. Vincenzo Quadrini, 2000. "Entrepreneurship, Saving and Social Mobility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 1-40, January.
    4. Radim Boháček & Jozef Zubrický, 2012. "A Flat Tax Reform in an Economy with Occupational Choice and Financial Frictions," Economic Journal, Royal Economic Society, vol. 122(565), pages 1313-1345, December.
    5. Erik Hurst & Benjamin Wild Pugsley, 2011. "What Do Small Businesses Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 73-142.
    6. Michael Cooper & John McClelland & James Pearce & Richard Prisinzano & Joseph Sullivan & Danny Yagan & Owen Zidar & Eric Zwick, 2016. "Business in the United States: Who Owns It, and How Much Tax Do They Pay?," Tax Policy and the Economy, University of Chicago Press, vol. 30(1), pages 91-128.
    7. Ellen R. McGrattan & Edward C. Prescott, 2010. "Technology Capital and the US Current Account," American Economic Review, American Economic Association, vol. 100(4), pages 1493-1522, September.
    8. Bettina Brueggemann, 2016. "Higher Taxes at the Top: The Role of Entrepreneurs," 2016 Meeting Papers 332, Society for Economic Dynamics.
    9. Cesaire Meh, 2005. "Entrepreneurship, Wealth Inequality, and Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(3), pages 688-719, July.
    10. Erik Hurst & Geng Li & Benjamin Pugsley, 2014. "Are Household Surveys Like Tax Forms? Evidence from Income Underreporting of the Self-Employed," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 19-33, March.
    11. Anmol Bhandari & Serdar Birinci & Ellen R. McGrattan, 2019. "Data Appendix: What Do Survey Data Tell Us about U.S. Businesses?," Staff Report 578, Federal Reserve Bank of Minneapolis.
    12. Matthew Smith & Danny Yagan & Owen Zidar & Eric Zwick, 2019. "Capitalists in the Twenty-First Century," The Quarterly Journal of Economics, Oxford University Press, vol. 134(4), pages 1675-1745.
    13. Jesse Bricker & Alice Henriques & Jacob Krimmel & John Sabelhaus, 2016. "Measuring Income and Wealth at the Top Using Administrative and Survey Data," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 261-331.
    14. Anmol Bhandari & Ellen R. McGrattan, 2017. "Sweat Equity in U.S. Private Business," Staff Report 560, Federal Reserve Bank of Minneapolis.
    15. Francisco Buera, 2009. "A dynamic model of entrepreneurship with borrowing constraints: theory and evidence," Annals of Finance, Springer, vol. 5(3), pages 443-464, June.
    16. Florian Scheuer, 2014. "Entrepreneurial Taxation with Endogenous Entry," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 126-163, May.
    17. Katya Kartashova, 2014. "Private Equity Premium Puzzle Revisited," American Economic Review, American Economic Association, vol. 104(10), pages 3297-3334, October.
    18. Ellen R. McGrattan & Edward C. Prescott, 2010. "Unmeasured Investment and the Puzzling US Boom in the 1990s," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 88-123, October.
    19. Emmanuel Saez & Gabriel Zucman, 2016. "Editor's Choice Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data," The Quarterly Journal of Economics, Oxford University Press, vol. 131(2), pages 519-578.
    20. Sagiri Kitao, 2008. "Entrepreneurship, taxation and capital investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 44-69, January.
    21. Tobias J. Moskowitz & Annette Vissing-Jørgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," American Economic Review, American Economic Association, vol. 92(4), pages 745-778, September.
    22. Johns, Andrew & Slemrod, Joel, 2010. "The Distribution of Income Tax Noncompliance," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(3), pages 397-418, September.
    23. John Haltiwanger & Erik Hurst & Javier Miranda & Antoinette Schoar, 2017. "Measuring Entrepreneurial Businesses: Current Knowledge and Challenges," NBER Books, National Bureau of Economic Research, Inc, number halt14-1, March.
    24. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Burkhard Heer & Mark Trede, 2020. "Age-Specific Entrepreneurship and PAYG Public Pensions in Germany," CESifo Working Paper Series 8439, CESifo.
    2. Corina Boar & Virgiliu Midrigan, 2020. "Efficient Redistribution," NBER Working Papers 27622, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Henrekson, Magnus & Sanandaji, Tino, 2013. "Small Business Activity Does not Measure Entrepreneurship," Working Paper Series 959, Research Institute of Industrial Economics, revised 26 Jan 2014.
    2. Mariacristina De Nardi & Giulio Fella, 2017. "Saving and Wealth Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 280-300, October.
    3. Andreas Fagereng & Luigi Guiso & Davide Malacrino & Luigi Pistaferri, 2020. "Heterogeneity and Persistence in Returns to Wealth," Econometrica, Econometric Society, vol. 88(1), pages 115-170, January.
    4. Clemens, Christiane & Heinemann, Maik, 2010. "On entrepreneurial risk-taking and the macroeconomic effects of financial constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1610-1626, September.
    5. Polbin, Andrey & Shumilov, Andrei, 2020. "Предпринимательство, Накопление Богатства И Ограничения Заимствования: Обзор Зарубежных Исследований [Entrepreneurship, wealth accumulation and borrowing constraints: Foreign research experience]," MPRA Paper 103675, University Library of Munich, Germany.
    6. Benjamin Pugsley & Sebastian Dyrda, 2017. "Taxes, Regulations of Businesses and Evolution of Income Inequality in the US," 2017 Meeting Papers 1463, Society for Economic Dynamics.
    7. Felipe Balmaceda, 2018. "Entrepreneurship: skills and financing," Small Business Economics, Springer, vol. 50(4), pages 871-886, April.
    8. Sari Pekkala Kerr & William R. Kerr & Tina Xu, 2017. "Personality Traits of Entrepreneurs: A Review of Recent Literature," NBER Working Papers 24097, National Bureau of Economic Research, Inc.
    9. Bettina Brueggemann, 2016. "Higher Taxes at the Top: The Role of Entrepreneurs," 2016 Meeting Papers 332, Society for Economic Dynamics.
    10. Poschke, Markus, 2013. "Who becomes an entrepreneur? Labor market prospects and occupational choice," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 693-710.
    11. Florian Scheuer, 2014. "Entrepreneurial Taxation with Endogenous Entry," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 126-163, May.
    12. Akyol, Ahmet & Athreya, Kartik, 2011. "Credit and self-employment," Journal of Economic Dynamics and Control, Elsevier, vol. 35(3), pages 363-385, March.
    13. de Meza, David & Dawson, Christopher & Henley, Andrew & Arabsheibani, G. Reza, 2019. "Curb your enthusiasm: Optimistic entrepreneurs earn less," European Economic Review, Elsevier, vol. 111(C), pages 53-69.
    14. Jason M. DeBacker & Bradley T. Heim & Vasia Panousi & Shanthi Ramnath & Ivan Vidangos, 2012. "The properties of income risk in privately held businesses," Finance and Economics Discussion Series 2012-69, Board of Governors of the Federal Reserve System (U.S.).
    15. Mariacristina De Nardi, 2015. "Quantitative Models of Wealth Inequality: A Survey," NBER Working Papers 21106, National Bureau of Economic Research, Inc.
    16. Sumudu Kankanamge & Alexandre Gaillard, 2019. "Entrepreneurship, Inter-Generational Business Transmission and Aging," 2019 Meeting Papers 1503, Society for Economic Dynamics.
    17. Boyan Jovanovic, 2019. "The entrepreneurship premium," Small Business Economics, Springer, vol. 53(3), pages 555-568, October.
    18. William Kerr & Ramana Nanda, 2009. "Financing Constraints and Entrepreneurship," NBER Working Papers 15498, National Bureau of Economic Research, Inc.
    19. Vincenzo Quadrini, 2009. "Entrepreneurship in macroeconomics," Annals of Finance, Springer, vol. 5(3), pages 295-311, June.
    20. Ross Levine & Yona Rubinstein, 2013. "Smart and Illicit: Who Becomes an Entrepreneur and Does it Pay?," CEP Discussion Papers dp1237, Centre for Economic Performance, LSE.

    More about this item

    Keywords

    Intangibles; Survey data; Business taxes and valuation;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmsr:568. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/cfrbmus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.