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The Icing on the Cake: The Effects of Monetary Incentives on Income Data Quality in the SIPP

January 2024

Working Paper Number:

CES-24-03

Abstract

Accurate measurement of key income variables plays a crucial role in economic research and policy decision-making. However, the presence of item nonresponse and measurement error in survey data can cause biased estimates. These biases can subsequently lead to sub-optimal policy decisions and inefficient allocation of resources. While there have been various studies documenting item nonresponse and measurement error in economic data, there have not been many studies investigating interventions that could reduce item nonresponse and measurement error. In our research, we investigate the impact of monetary incentives on reducing item nonresponse and measurement error for labor and investment income in the Survey of Income and Program Participation (SIPP). Our study utilizes a randomized incentive experiment in Waves 1 and 2 of the 2014 SIPP, which allows us to assess the effectiveness of incentives in reducing item nonresponse and measurement error. We find that households receiving incentives had item nonresponse rates that are 1.3 percentage points lower for earnings and 1.5 percentage points lower for Social Security income. Measurement error was 6.31 percentage points lower at the intensive margin for interest income, and 16.48 percentage points lower for dividend income compared to non-incentive recipient households. These findings provide valuable insights for data producers and users and highlight the importance of implementing strategies to improve data quality in economic research.

Document Tags and Keywords

Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

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exogeneity, endogeneity, estimating, survey, respondent, earnings, incentive, consumption, bias, indicator, policy, irs, income survey, survey income, assessing, taxpayer

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Internal Revenue Service, Social Security Administration, Current Population Survey, Survey of Income and Program Participation, Social Security, Detailed Earnings Records, Master Beneficiary Record, Disability Insurance, Protected Identification Key, Master Earnings File, Census Bureau Disclosure Review Board, ASEC, Person Validation System, Supplemental Nutrition Assistance Program, Census Bureau Person Identification Validation System

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