On the Extent, Correlates, and Consequences of Reporting Bias in Survey Wages

Marco Caliendo, Katrin Huber, Ingo E. Isphording () and Jakob Wegmann ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Surveys are an indispensable source of data for applied economic research; however, their reliance on self-reported information can introduce bias, especially if core variables such as personal income are misreported. To assess the extent and impact of this misreporting bias, we compare self-reported wages from the German Socio-Economic Panel (SOEP) with administrative wages from social security records (IEB) for the same individuals. Using a novel and unique data linkage (SOEP-ADIAB), we identify a modest but economically significant reporting bias, with SOEP respondents underreporting their administrative wages by about 7.3%. This misreporting varies systematically with individual, household, and especially job and firm characteristics. In replicating common empirical analyses in which wages serve as either dependent or independent variables, we find that misreporting is consequential for some, but not all estimated relationships. It turns out to be inconsequential for examining the returns to education, but relevant for analyzing the gender wage gap. In addition we find that misreporting bias can significantly affect the results when wage is used as the independent variable. Specifically, estimates of the wage-satisfaction relationship are substantially overestimated when based on survey data, although this bias is mitigated when focusing on interpersonal changes. Our Findings underscore that survey-based measures of individual wages can significantly bias commonly estimated empirical relationships. They also demonstrate the enormous research potential of linked administrative-survey data.

Keywords: reporting bias; measurement error; wage; income; administrative data; survey data; data linkage (search for similar items in EconPapers)
JEL-codes: D31 J01 J30 (search for similar items in EconPapers)
Pages: 51
Date: 2025-01
New Economics Papers: this item is included in nep-hrm and nep-lma
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Working Paper: On the Extent, Correlates, and Consequences of Reporting Bias in Survey Wages (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2025_619

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