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Estimating Measurement Error in SIPP Annual Job Earnings: A Comparison of Census Bureau Survey and SSA Administrative Data

July 2011

Working Paper Number:

CES-11-20

Abstract

We quantify sources of variation in annual job earnings data collected by the Survey of Income and Program Participation (SIPP) to determine how much of the variation is the result of measurement error. Jobs reported in the SIPP are linked to jobs reported in an administrative database, the Detailed Earnings Records (DER) drawn from the Social Security Administration's Master Earnings File, a universe file of all earnings reported on W-2 tax forms. As a result of the match, each job potentially has two earnings observations per year: survey and administrative. Unlike previous validation studies, both of these earnings measures are viewed as noisy measures of some underlying true amount of annual earnings. While the existence of survey error resulting from respondent mistakes or misinterpretation is widely accepted, the idea that administrative data are also error-prone is new. Possible sources of employer reporting error, employee under-reporting of compensation such as tips, and general differences between how earnings may be reported on tax forms and in surveys, necessitates the discarding of the assumption that administrative data are a true measure of the quantity that the survey was designed to collect. In addition, errors in matching SIPP and DER jobs, a necessary task in any use of administrative data, also contribute to measurement error in both earnings variables. We begin by comparing SIPP and DER earnings for different demographic and education groups of SIPP respondents. We also calculate different measures of changes in earnings for individuals switching jobs. We estimate a standard earnings equation model using SIPP and DER earnings and compare the resulting coefficients. Finally exploiting the presence of individuals with multiple jobs and shared employers over time, we estimate an econometric model that includes random person and firm effects, a common error component shared by SIPP and DER earnings, and two independent error components that represent the variation unique to each earnings measure. We compare the variance components from this model and consider how the DER and SIPP differ across unobservable components.

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.

By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the text, highlighting the most significant topics and trends. This approach not only enhances searchability but provides connections that go beyond potentially domain-specific author-defined keywords.
:
survey, respondent, earnings, employee, employed, statistician, imputation, discrepancy, tax, irs, ssa, earn, employee data, earner, wage earnings, survey income, assessing, employment earnings, earnings employees, assessed

Tags Tags are automatically generated using a pretrained language model from spaCy, which excels at several tasks, including entity tagging.

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:
Internal Revenue Service, Social Security Administration, Financial, Insurance and Real Estate Industries, Current Population Survey, Employer Identification Numbers, Survey of Income and Program Participation, Cornell University, Social Security, Research Data Center, Social Security Number, National Institute on Aging, Alfred P Sloan Foundation, Cornell Institute for Social and Economic Research, PSID, Business Register, Detailed Earnings Records, Public Administration, Computer Assisted Personal Interview, W-2, Master Earnings File, Person Validation System

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