The Review of Economics and Statistics Vol. 96 No. 3 2014
Measuring True Sales and Underreporting with Matched Firm-Level Survey and Tax Office Data
Abstract
This paper uses firm-level survey data matched with official tax records to estimate the unobserved true sales of formal firms in Mongolia. Taking into account firm-level incentives to comply with taxes and a production function technology linking unobserved true sales with observable firm-level production characteristics, we derive a multiple-indicators, multiple-causes model predicting true sales. We find that firms underreport sales to the tax office by 38.6%, but firm-level survey data also suffer from significant underreporting. Finally, we compare our approach with two alternative approaches of measuring underreporting and discuss the practical implications of the findings for firm-level analyses of underreporting.
- DOI
- 10.1162/rest_a_00408
- Volume
- 96
- Issue
- 3
- Pages
- 563-576
- Language
- en
- Sources
- openalex crossref