Federal Reserve Board
Washington, DC 20551
Information about this author at RePEc
NBER Working Papers and Publications
|November 2010||Are Household Surveys Like Tax Forms: Evidence from Income Underreporting of the Self Employed|
with Erik Hurst, Benjamin Pugsley: w16527
There is a large literature showing that the self employed underreport their income to tax authorities. In this paper, we quantify the extent to which the self employed systematically underreport their income to U.S. household surveys. To do so, we use the Engel curve describing the relationship between income and expenditures of wage and salary workers to infer the actual income, and thus the reporting gap, of the self employed based on their reported expenditures. We find that the self employed underreport their income by about 30 percent. This result is remarkably robust across data sources and alternative model specifications. Aside from transportation expenditures, we find little evidence that the self employed misreport their expenditures to household surveys. We show that failin...
"Are Household Surveys Like Tax Forms: Evidence from Income Underreporting of the Self Employed" (with Geng Li and Ben Pugsley), Review of Economics and Statistics, forthcoming. citation courtesy of