Correcting for Underreporting of Government Transfers: A Regression-Based Approach With Preliminary Results
Presentation
Presentation by Bilal Habib, an analyst in CBO’s Tax Analysis Division, at a Washington Center for Equitable Growth workshop on distributional national accounts.
CBO’s analyses of the distribution of household income and federal taxes are based on administrative tax data from the Internal Revenue Service’s Statistics of Income (SOI) and on household survey data from the Census Bureau’s Current Population Survey (CPS). CPS respondents tend to underreport their receipt of government transfers, and the level of underreporting has increased over time. Any CPS-based analysis of the income distribution that does not correct for that underreporting will probably underestimate income growth at the bottom of the distribution and the role of government transfers in reducing income inequality.
In this presentation, CBO outlines a method to correct for underreporting in several transfer programs from 1979 through 2013 and examines the distributional effects of those corrections. The information is preliminary and is being circulated to stimulate discussion and critical comment.
