Validating Earnings in the German National Educational Panel Study. Determinants of Measurement Accuracy of Survey Questions on Earnings

Abstract

Questions on earnings are counted among sensitive topics that often produce high rates of item nonresponse or measurement error. Both types of bias are well documented in the literature and are found to concentrate in the tails of the earnings distribution. In this paper, we explore whether measurement error on earnings could be explained by socially desirable
reporting and whether the error is impacted by interviewer characteristics.

Using the linked dataset NEPS-SC6-ADIAB, which contains survey data  from the German National Educational Panel Study, Starting Cohort “Adults”, linked to administrative earnings records from the German Federal Employment Agency, we analyze the extents of over- and underreporting and the influence of respondent and interviewer characteristics on these behaviors for different quartiles of the earnings distribution.

Our results show that the average level of misreporting is relatively low (approximately 6% of median earnings). Our main logistic model reveals that female and more highly educated respondents report significantly more accurately while those with higher earnings misreport to a significantly greater extent. Regarding the impact of personality traits on reporting accuracy, we find significant positive effects for more agreeable respondents and significant negative effects for extraverted respondents. When differentiating by the direction of misreporting, we find, for instance, that women are less likely to overreport across all earnings quartiles. However, the influence of interviewer characteristics is negligible.