Does Encouraging Record Use for Financial Assets Improve Data Accuracy? Evidence from Administrative Data.

Many surveys ask respondents to consult financial records in order to improve data accuracy. However, the assumption that record use reduces measurement error has not been tested with a large-scale comparison to administrative data. This paper compares interest, dividend, and rental income in the Survey of Income and Program Participation (SIPP) to administrative IRS 1040 tax data. In a novel estimation strategy, we use various measures of respondent motivation and precision to account for nonrandom selection. Our results show that record use is associated with reducing the discrepancy between survey and administrative data by approximately 21 to 43 percent. In terms of potential costs from encouraging record use, record users spend an extra 3.5 seconds for each asset question, on average, after controlling for their behavior in other parts of the SIPP interview. The extra time per question translates to a 2.2 percent increase in the total duration of the interview. Thus, while record use may be an effective tool for improving data accuracy, it may come at the cost of higher interviewer compensation and increased respondent burden. [ABSTRACT FROM AUTHOR]