For example, for Greece, Matsaganis and Flevoto mou (2010) find that "farming or self-employment incomes are more likely to be underreported in tax returns: average underreporting rates for these two sources are 53% and 24%, respectively" (19).
Correcting for underreporting of self-employment income using our preferred correction factor reduces the measured agricultural productivity gap by 38%.
Motivated by empirical evidence, we focus on underreporting of self-employment income as a source of mismeasurement of value added.
Given the evidence indicating underreporting of self-employment income and the systematic positive relationship between mismeasurement and self-employed share of hours in agriculture, we evaluate the quantitative impact of underreporting of self-employment income on measured agricultural productivity gap.
We therefore conclude that mismeasurement of value added because of underreporting of self-employment income can account for a significant portion of the measured agricultural productivity gaps in Europe.
Section IV explores whether underreporting of self-employment income could explain the mismeasurement.
The first has been increasing reliance on household-based survey data, which are known to under-report investment-related and self-employment incomes relative to others.
Jenkins found much greater inequality during 1971 - 86 in both RDI and self-employment incomes than in employment income or private pensions (Table 8).
Households with high investment and self-employment incomes tend to be under-represented and, when represented, to under-report those two categories of income in particular.
In terms of levels, the shares of investment-related and self-employment incomes in household disposable income are markedly higher in the national accounts than in the FES.
Survey-based estimates of factor shares in household incomes suffer not only from the two problems identified here in Blue Book estimates but also from systematic under-reporting of investment and self-employment incomes.
Rather, factor shares matter as compositional weights in the generation of overall inequality, given that the distributions of investment-related income and self-employment income are much more unequal than is that of employment income.
