Earnings Through the Stages: Using Tax Data to Test for Sources of Error in CPS ASEC Earnings and Inequality Measures
September 2024
Working Paper Number:
CES-24-52
Abstract
In this paper, I explore the impact of generalized coverage error, item non-response bias, and measurement error on measures of earnings and earnings inequality in the CPS ASEC. I match addresses selected for the CPS ASEC to administrative data from 1040 tax returns. I then compare earnings statistics in the tax data for wage and salary earnings in samples corresponding to seven stages of the CPS ASEC survey production process. I also compare the statistics using the actual survey responses. The statistics I examine include mean earnings, the Gini coefficient, percentile earnings shares, and shares of the survey weight for a range of percentiles. I examine how the accuracy of the statistics calculated using the survey data is affected by including imputed responses for both those who did not respond to the full CPS ASEC and those who did not respond to the earnings question. I find that generalized coverage error and item nonresponse bias are dominated by measurement error, and that an important aspect of measurement error is households reporting no wage and salary earnings in the CPS ASEC when there are such earnings in the tax data. I find that the CPS ASEC sample misses earnings at the high end of the distribution from the initial selection stage and that the final survey weights exacerbate this.
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