"The Persistence of Income Reporting Errors in Household Survey Data"

(joint with Iva Tasseva)

We examine the dynamics of income source misreporting in panel household survey data. We use a unique panel of survey data, the Austrian version of the SILC, linked to administrative records on state unemployment benefits and earnings. We find that misreporting is dynamic in three ways: errors persist over time; longer unemployment benefit spells are more likely to be partially missed; and among longer benefit spells some missed benefit income appears to be reported as earnings. These patterns reject Markov-type assumptions used to identify transition probabilities when administrative data are unavailable. We show that error persistence over time, combined with errors across sources, has important implications for substantive questions. Errors cause large biases in estimates of transitions into and out of earnings receipt, government programme participation, and poverty, and particularly the effectiveness of unemployment benefits in alleviating poverty.