Working Paper: NBER ID: w2884
Authors: John Bound; Charles Brown; Greg J. Duncan; Willard L. Rodgers
Abstract: This paper reports evidence on the error properties of survey reports of labor market variables such as earnings and work hours. Our primary data source is the PSID Validation Study, a two-wave panel survey of a sample of workers employed by a large firm which also allowed us access to its very detailed records of its workers earnings. etc. The second data source uses individuals' 1977 and 1978 (March Current Population Survey) reports of earnings, matched to Social Security earnings records. In both data sets, individuals: reports of earnings are fairly accurately reported, and the errors are negatively related to true earnings. The latter property reduces the bias due to measurement error when earnings are used as an independent variable, but (unlike the classical-error case) leads to some bias when earnings are the dependent variable. Measurement-error-induced biases when change in earnings is the variable of interest are larger, but not dramatically so. Various measures of hourly earnings were much less reliable than annual earnings. Retrospective reports of unemployment showed considerable under-reporting, even of long spells.
Keywords: Measurement Error; Labor Market Surveys; Validation Studies
JEL Codes: C81; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| measurement error in earnings (J31) | bias when earnings are dependent variables (C51) |
| measurement error in earnings (J31) | reduces bias when earnings are independent variables (C51) |
| measurement error in earnings (J31) | negatively correlated with true earnings (J31) |
| measurement error biases (C83) | larger when examining changes in earnings (J31) |
| panel survey measures of change in earnings (J31) | reliability is surprisingly high (D80) |
| reported earnings (E01) | actual earnings (J31) |