Measurement Error and Misclassification

The authors provide both a theoretical and empirical analysis of the relation between administrative and survey data. By distinguishing between different sources of deviations between survey and administrative data they are able to reproduce several stylized facts. The authors illustrate the implications of different error sources for estimation in (simple) econometric models and find potentially very substantial biases. This article shows the sensitivity of some findings in the literature for the assumption that administrative data represent the truth. In particular, the common finding of substantial mean reversion in survey data largely goes away once the authors allow for a richer error structure.