Using Panel Data to Estimate Income Under‐Reporting by the Self‐Employed

24 Pages Posted: 7 Dec 2016

See all articles by Bonggeun Kim

Bonggeun Kim

Seoul National University

John Gibson

University of Waikato; Motu Economic and Public Policy Research

Chul Chung

Korea Institute for International Economic Policy

Date Written: January 2017

Abstract

Self‐employment income is believed to be understated in economic statistics but there is debate about the extent of under‐reporting. This paper refines the widely used method of Pissarides and Weber (Journal of Public Economics, Vol. 39, No. 1 (1989), pp. 17–32) that relies on discrepancies between food shares and reported incomes. Our panel data approach disentangles under‐reporting from fluctuations in transitory income and gives a point estimate of the under‐reporting rate. Previous studies just give an interval estimate and also make the unlikely assumption that under‐reporting is independent of transitory income fluctuations. Panel data from Korea and Russia are used to illustrate the method, and suggest that in both countries almost one‐quarter of the income of self‐employed households is not reported.

Suggested Citation

Kim, Bonggeun and Gibson, John and Chung, Chul, Using Panel Data to Estimate Income Under‐Reporting by the Self‐Employed (January 2017). The Manchester School, Vol. 85, Issue 1, pp. 41-64, 2017. Available at SSRN: https://ssrn.com/abstract=2881026 or http://dx.doi.org/10.1111/manc.12135

Bonggeun Kim (Contact Author)

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

John Gibson

University of Waikato ( email )

Te Raupapa
Private Bag 3105
Hamilton, 3240
New Zealand

Motu Economic and Public Policy Research

19 Milne Terrace
Island Bay
Wellington, 6002
New Zealand

Chul Chung

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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