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Measurement error in earnings data in the health and retirement study

, and . Journal of Economic and Social Measurement, 33 (1): 39-61 (2008)

Abstract

This paper provides new evidence on the extent of measurement error in respondent-reported earnings data by exploiting detailed W-2 records matched to older workers in the Health and Retirement Study (HRS). There is a negative correlation between the measurement error and the true value of earnings as measured by the W-2 records, which indicates the presence of non-classical measurement error. Yet for men and women, this error shows little correlation with a standard set of cross-sectional earnings determinants. Quantitatively, the bias from using self-reported earnings, either as a dependent or explanatory variable, is larger than those from existing studies of the CPS and PSID.

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