Self-Employment Incomes in the Italian EU-SILC Measurement and International Comparability Marco Di Marco

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1 Incomes in the Italian EU-SILC Measurement and International Comparability Marco Di Marco Eurostat and Statistics Finland International Conference on Comparative EU Statistics on Income and Living Conditions: Issues and Challenges Session on Income Measurement in EU SILC Helsinki, 6th November 2006

2 CONTENTS COMPARABILITY: WHAT DOES IT MEAN?

3 CONTENTS COMPARABILITY: WHAT DOES IT MEAN? SELF-EMPLOYMENT INCOMES IN THE ITALIAN EU SILC

4 THE CHALLENGE OF COMPARABILITY EU SILC Framework Regulation (art. 1): international comparability is a fundamental aim, to be pursued through methodological studies, carried out in close co-operation between Member States and Eurostat

5 THE CHALLENGE OF COMPARABILITY EU SILC Framework Regulation (art. 1): international comparability is a fundamental aim, to be pursued through methodological studies, carried out in close co-operation between Member States and Eurostat Now also endorsed in the European Code of Statistical Practices

6 THE CHALLENGE OF COMPARABILITY EU SILC Framework Regulation (art. 1): international comparability is a fundamental aim, to be pursued through methodological studies, carried out in close co-operation between Member States and Eurostat the EU SILC project has been started with two ambitious purposes: to provide a set of harmonised statistics on incomes and living conditions following the best practices available to launch a co-ordinated experiment in improving the state of the art in the collection/measurement of incomes and living conditions

7 DEFINING COMPARABILITY Verma (2002 and 2006): [ ] may defy precise definition [ ] we mean that data (estimates) for different populations can be legitimately (i.e. in a statistical valid way) put together (aggregated), compared (differenced), and interpreted (given meaning) in relation to each other and/or against some common standard. Comparability is a relative concept: we can only have degrees of comparability, not absolute comparability.

8 DEFINING COMPARABILITY Verma (2002 and 2006): [ ] may defy precise definition [ ] we mean that data A multidimensional complex concept! Can (should) we have a simple definition?

9 DEFINING COMPARABILITY COMPARABILITY IS A PROPERTY OF THE DATA Verma (2002 and 2006): [ ] may defy precise definition [ ] we mean that data (estimates) for different populations can be legitimately (i.e. in a statistical valid way) put together (aggregated), compared (differenced), and interpreted (given meaning) in relation to each other and/or against some common standard. Comparability is a relative concept: we can only have degrees of comparability, not absolute comparability.

10 DEFINING COMPARABILITY COMPARABILITY IS A PROPERTY OF THE DATA (i.e. of the data production processes) Verma (2002 and 2006): [ ] may defy precise definition [ ] we mean that data (estimates) for different populations can be legitimately (i.e. in a statistical valid way) put together (aggregated), compared (differenced), and interpreted (given meaning) in relation to each other and/or against some common standard. Comparability is a relative concept: we can only have degrees of comparability, not absolute comparability.

11 DEFINING COMPARABILITY Verma (2002 and 2006): [ ] may defy precise definition [ ] we mean that data (estimates) for different populations can be legitimately (i.e. in a statistical valid way) put together (aggregated), compared (differenced), and interpreted (given meaning) in relation to each other and/or against some common standard. Comparability is a relative concept: we can only have degrees of comparability, not absolute comparability. OF THE STATISTICS

12 DEFINING COMPARABILITY Verma (2002 and 2006): [ ] may defy precise definition [ ] we mean that data (estimates) for different populations can be legitimately (i.e. in a statistical valid way) put together (aggregated), compared (differenced), and interpreted (given meaning) in relation to each other and/or against some common standard. Comparability is a relative concept: we can only have degrees of comparability, not absolute comparability. OF THE INTERPRETATIONS

13 DEFINING COMPARABILITY Verma (2002 and 2006): [ ] may defy precise definition [ ] we mean that data (estimates) for different populations can be legitimately (i.e. in a statistical valid way) put together (aggregated), compared (differenced), and interpreted (given meaning) in relation to each other and/or against some common standard. Comparability is a relative concept: we can only have degrees of comparability, not absolute comparability. WE SHOULD SEEK FOR ORDINAL MEASURES OF COMPARABILITY

14 DEFINING COMPARABILITY the dataset (the statistic, the interpretation) A is more suitable for international comparisons than B. Such ordinal assessments are the only way to evaluate the success of the endeavours to produce: datasets indicators analyses

15 DEFINING COMPARABILITY the dataset (the statistic, the interpretation) A is more suitable for international comparisons than B. Such ordinal assessments are the only way to evaluate the success of the endeavours to produce: datasets indicators analyses harmonised at the international level

16 DEFINING COMPARABILITY COMPARABILITY IS THE ULTIMATE AIM OF HARMONISATION

17 DEFINING COMPARABILITY DATA COMPARABILITY AND WELFARE COMPARABILITY Welfare comparability: statistics and interpretations

18 DEFINING COMPARABILITY DATA COMPARABILITY AND WELFARE COMPARABILITY Welfare comparability: statistics and interpretations Data comparability ( = comparable data production processes)

19 DEFINING COMPARABILITY DATA COMPARABILITY AND WELFARE COMPARABILITY Welfare comparability: statistics and interpretations Data comparability ( = comparable data production processes) is a necessary condition for welfare comparability

20 DEFINING COMPARABILITY DATA COMPARABILITY AND WELFARE COMPARABILITY Welfare comparability: statistics and interpretations Data comparability ( = comparable data production processes) is a necessary condition for welfare comparability Not always sufficient: PPP s equivalence scales

21 DEFINING COMPARABILITY DATA COMPARABILITY AND WELFARE COMPARABILITY Welfare comparability: statistics and interpretations Data comparability ( = comparable data production processes) is a necessary condition for welfare comparability Not always sufficient: PPP s equivalence scales In these cases, HOWEVER, data production processes are not directly concerned

22 DEFINING COMPARABILITY DATA COMPARABILITY AND WELFARE COMPARABILITY Conversely, under-estimation of income calls for improvements in measurement accuracy

23 DEFINING COMPARABILITY DATA COMPARABILITY AND WELFARE COMPARABILITY Conversely, under-estimation of income calls for improvements in measurement accuracy and the presence of non-monetary components of income (self-production, imputed rents, social transfers in kind) for a more comprehensive definition of income

24 DEFINING COMPARABILITY DATA COMPARABILITY AND WELFARE COMPARABILITY Conversely, under-estimation of income calls for improvements in measurement accuracy and the presence of non-monetary components of income (self-production, imputed rents, social transfers in kind) for a more comprehensive definition of income In these cases, data production processes ARE CONCERNED

25 DEFINING COMPARABILITY A TENTATIVE DEFINITION Comparability of income data is a property (a set of properties) of the data production processes (inputs, techniques and outputs)

26 DEFINING COMPARABILITY A TENTATIVE DEFINITION Comparability of income data is a property (a set of properties) of the data production processes (inputs, techniques and outputs) that permits meaningful comparisons, within and across countries (regions, sub-groups),

27 DEFINING COMPARABILITY A TENTATIVE DEFINITION Comparability of income data is a property (a set of properties) of the data production processes (inputs, techniques and outputs) that permits meaningful comparisons, within and across countries (regions, sub-groups), meaningful means useful for welfare analysis (a bridge between data and welfare comparability)

28 DEFINING COMPARABILITY A TENTATIVE DEFINITION MEANINGFUL IF: semantic consistency of the national definitions with the common EU SILC Target Variable definition

29 DEFINING COMPARABILITY A TENTATIVE DEFINITION MEANINGFUL IF: semantic consistency of the national definitions with the common EU SILC Target Variable definition total disposable income as comprehensive as possible (AS INCOME IS USED AS A PROXY FOR WELFARE)

30 DEFINING COMPARABILITY A TENTATIVE DEFINITION MEANINGFUL IF: semantic consistency of the national definitions with the common EU SILC Target Variable definition total disposable income as comprehensive as possible (AS INCOME IS USED AS A PROXY FOR WELFARE) a partial measure of income reduces comparability

31 DEFINING COMPARABILITY A TENTATIVE DEFINITION Comparability of income data is a property (a set of properties) of the data production processes (inputs, techniques and outputs) that permits meaningful comparisons, within and across countries (regions, sub-groups), between any couple of statistical units.

32 DEFINING COMPARABILITY A TENTATIVE DEFINITION Comparability of income data is a property (a set of properties) of the data production processes (inputs, techniques and outputs) that permits meaningful comparisons, within and across countries (regions, sub-groups), between any couple of statistical units. MICRO COMPARABILITY

33 DEFINING COMPARABILITY DATA COMPARABILITY = MICRO COMPARABILITY Comparability at the micro level, i.e. between the incomes of any couple of households/individuals living in any of the countries,

34 DEFINING COMPARABILITY DATA COMPARABILITY = MICRO COMPARABILITY Comparability at the micro level, i.e. between the incomes of any couple of households/individuals living in any of the countries, is a necessary condition for meaningful welfare comparisons at the aggregated level, too

35 DEFINING COMPARABILITY DATA COMPARABILITY = MICRO COMPARABILITY Comparability at the micro level, i.e. between the incomes of any couple of households/individuals living in any of the countries, is a necessary condition for meaningful welfare comparisons at the aggregated level, too WHY? the preliminar step for the correct computation of most well-known inequality indexes consists in ranking the statistical units from the poorest to the richest

36 DEFINING COMPARABILITY WITHIN AND ACROSS Micro comparability within country ( any couple of statistical units of country A can be compared )

37 DEFINING COMPARABILITY WITHIN AND ACROSS Micro comparability within country ( any couple of statistical units of country A can be compared ) and across countries ( any statistical unit of country A can be compared to any statistical unit of country B )

38 DEFINING COMPARABILITY WITHIN AND ACROSS Micro comparability within country ( any couple of statistical units of country A can be compared ) and across countries ( any statistical unit of country A can be compared to any statistical unit of country B ) Both are required for the international comparability of income data

39 DEFINING COMPARABILITY Within country to compare national inequality indexes (for example, Gini indexes for Italy and France)

40 DEFINING COMPARABILITY Within country to compare national inequality indexes (for example, Gini indexes for Italy and France) Across countries to compare all countries against a common benchmark (for example a European Poverty Line)

41 DEFINING COMPARABILITY A TENTATIVE DEFINITION Comparability of income data is a property (a set of properties) of the data production processes (inputs, techniques and outputs) that permits meaningful comparisons, within and across countries (regions, sub-groups), between any couple of statistical units. a circular definition!!!

42 DEFINING COMPARABILITY WHAT IS A COMPARISON? In mathematics, the elements of a set are comparable if, for any couple of elements x and y of the set, there exist a relation R such that at least one of the two following statements is true: x R y ; y R x

43 DEFINING COMPARABILITY WHAT IS A COMPARISON? In mathematics, the elements of a set are comparable if, for any couple of elements x and y of the set, there exist a relation R such that at least one of the two following statements is true: x R y ; y R x Each one of the preceding statements (as well as their logical union) is a comparison.

44 DEFINING COMPARABILITY WHAT IS A COMPARISON? In mathematics, the elements of a set are comparable if, for any couple of elements x and y of the set, there exist a relation R such that at least one of the two following statements is true: x R y ; y R x Each one of the preceding statements (as well as their logical union) is a comparison. For the income variable, an obvious choice for the relation is the greater than or equal one

45 DEFINING COMPARABILITY WHAT IS A COMPARISON? In mathematics, the elements of a set are comparable if, for any couple of elements x and y of the set, there exist a relation R such that at least one of the two following statements is true: x R y ; y R x Each one of the preceding statements (as well as their logical union) is a comparison. For the income variable, an obvious choice for the relation is the greater than or equal one, because it permits to rank the statistical units from the poorest to the richest (PENS S PARADE)

46 DEFINING COMPARABILITY A TENTATIVE DEFINITION in short: COMPARABILITY AS MEANINGFUL ACCURACY (at the micro level)

47 IMPROVING COMPARABILITY UNDER-ESTIMATION IS THE MAJOR CHALLENGE TO THE INTERNATIONAL COMPARABILITY OF INCOME DATA

48 IMPROVING COMPARABILITY UNDER-ESTIMATION IS THE MAJOR CHALLENGE TO THE INTERNATIONAL COMPARABILITY OF INCOME DATA If under-estimated components of income are dropped: the income definition is not comprehensive (! lower comparability)

49 IMPROVING COMPARABILITY UNDER-ESTIMATION IS THE MAJOR CHALLENGE TO THE INTERNATIONAL COMPARABILITY OF INCOME DATA If under-estimated components of income are dropped: the income definition is not comprehensive (! lower comparability) If under-estimated components of income are included: the income measure is less accurate (! lower comparability)

50 IMPROVING COMPARABILITY UNDER-ESTIMATION IS THE MAJOR CHALLENGE TO THE INTERNATIONAL COMPARABILITY OF INCOME DATA If under-estimated components of income are dropped: the income definition is not comprehensive (! lower comparability) If under-estimated components of income are included: the income measure is less accurate (! lower comparability) Since it reduces comparability anyway, under-estimation should be MINIMISED

51 SELF-EMPLOYMENT INCOMES TAX AVOID. & DEDUCTIONS GROSS INCOME TAXABLE INCOME TAXES + CONTRIB. NET TAXABLE INCOME DISPOSABLE INCOME UNDER- REPORTING INCOME REPORTED

52 SELF-EMPLOYMENT INCOMES ADMINISTRATIVE DATA TAX AVOID. & DEDUCTIONS GROSS INCOME TAXABLE INCOME TAXES + CONTRIB. NET TAXABLE INCOME DISPOSABLE INCOME UNDER- REPORTING INCOME REPORTED

53 SELF-EMPLOYMENT INCOMES SURVEY DATA TAX AVOID. & DEDUCTIONS GROSS INCOME TAXABLE INCOME TAXES + CONTRIB. NET TAXABLE INCOME DISPOSABLE INCOME UNDER- REPORTING INCOME REPORTED

54 SELF-EMPLOYMENT INCOMES CONTENT OF DATASOURCES The alternative sources of microdata on earnings from self-employment may not contain the item disposable income as such.

55 SELF-EMPLOYMENT INCOMES CONTENT OF DATASOURCES The alternative sources of microdata on earnings from self-employment may not contain the item disposable income as such Survey data may be affected by underreporting. Administrative data gathering the individual tax returns do not take account, of course, of illegal tax evasion and may not display all the authorized deductions allowed in the calculation of taxable income (tax avoidance)

56 SELF-EMPLOYMENT INCOMES TAX AVOIDANCE the tax authorities may allow special deductions (e.g. for the profits retained and invested in the business)

57 SELF-EMPLOYMENT INCOMES TAX AVOIDANCE the tax authorities may allow special deductions (e.g. for the profits retained and invested in the business) Also, departures from standard accounting rules (e.g. depreciation costs)

58 SELF-EMPLOYMENT INCOMES TAX AVOIDANCE the tax authorities may allow special deductions (e.g. for the profits retained and invested in the business) Also, departures from standard accounting rules (e.g. depreciation costs) Some categories of taxpayers (e.g. family business, farmers, starting-up companies ) may be subject to a preferential tax regime that grants them special benefits

59 SELF-EMPLOYMENT INCOMES THE ITALIAN APPROACH For the, when both the administrative and the survey datasources report it, income from self-employment is set equal to the maximum value between: (i) the (net) self-empl. income resulting in the tax return (ii) the (net) self-empl. income reported by the interviewee

60 SELF-EMPLOYMENT INCOMES THE ITALIAN APPROACH For the, when both the administrative and the survey datasources report it, income from self-employment is set equal to the maximum value between: (i) the (net) self-empl. income resulting in the tax return (ii) the (net) self-empl. income reported by the interviewee This departure from the standard definition is adopted in order to minimise either: under-estimation due to tax avoidance/evasion in the administrative data or: under-reporting in the survey data

61 SELF-EMPLOYMENT INCOMES THE ITALIAN APPROACH For the, when both the administrative and the survey datasources report it, income from self-employment is set equal to the maximum value between: (i) the (net) self-empl. income resulting in the tax return (ii) the (net) self-empl. income reported by the interviewee This departure from the standard definition is adopted in order to minimise either: under-estimation due to tax avoidance/evasion in the administrative data or: under-reporting in the survey data depending on which of the two is larger!

62 SELF-EMPLOYMENT INCOMES THE ITALIAN APPROACH the underlying assumption is that no individual over-reports her/his incomes either in the survey or in the tax return under this assumption, the highest value is closer to the true value

63 SELF-EMPLOYMENT INCOMES THE ITALIAN APPROACH The procedure increases the degree of international comparability of the Italian income data under the assumption that self-employment income in the benchmark country is not under-estimated

64 SELF-EMPLOYMENT INCOMES THE ITALIAN APPROACH The procedure increases the degree of international comparability of the Italian income data under the assumption that self-employment income in the benchmark country is not under-estimated The true national income should be set as the comparable benchmark in all EU SILC countries

65 SELF-EMPLOYMENT INCOMES CONTENT OF DATASOURCES The two datasources do not perfectly overlap: some individuals report self-employment incomes in only one datasource

66 SELF-EMPLOYMENT INCOMES CONTENT OF DATASOURCES The two datasources do not perfectly overlap: some individuals report self-employment incomes in only one datasource This is the case of some individuals whose professional status at the time of the interview is different from that of the income reference period For example, a shopkeeper, who went on pension during the income reference period, may disregard his past self-employment incomes in the survey questionnaire

67 SELF-EMPLOYMENT INCOMES CONTENT OF DATASOURCES The two datasources do not perfectly overlap: some individuals report self-employment incomes in only one datasource This is the case of some individuals whose professional status at the time of the interview is different from that of the income reference period an employee, who has been unemployed during the income reference period, may disregard his past unemployment benefits in the survey questionnaire

68 SELF-EMPLOYMENT INCOMES CONTENT OF DATASOURCES The two datasources do not perfectly overlap: some individuals report self-employment incomes in only one datasource This is the case of some individuals whose professional status at the time of the interview is different from that of the income reference period and of many percipients of small and/or secondary self-employment incomes the incomes of baby-sitters may be reported in the survey questionnaire while being un-noticed for tax purposes

69 SELF-EMPLOYMENT INCOMES CONTENT OF DATASOURCES The two datasources do not perfectly overlap: some individuals report self-employment incomes in only one datasource This is the case of some individuals whose professional status at the time of the interview is different from that of the income reference period and of many percipients of small and/or secondary self-employment incomes minor additional incomes of employees may be reported in the tax return and ignored in the survey questionnaire

70 SELF-EMPLOYMENT INCOMES SURVEY SELF-EMPLOYMENT INCOMES The collection of self-employment incomes through personal interviews aims at: minimising reporting errors devising suitable imputation procedures

71 SELF-EMPLOYMENT INCOMES SURVEY SELF-EMPLOYMENT INCOMES The collection of self-employment incomes through personal interviews aims at: minimising reporting errors devising suitable imputation procedures The setup of the imputation procedures has been eased: by the rich qualitative information available in the survey by the reduction of the unreliable answers retained among the valid cases.

72 SELF-EMPLOYMENT INCOMES SURVEY SELF-EMPLOYMENT INCOMES the interviewers were asked: not to compel reluctant individuals A MISSING INCOME IS BETTER THAN A FALSE ONE

73 SELF-EMPLOYMENT INCOMES SURVEY SELF-EMPLOYMENT INCOMES the interviewers were asked: not to compel reluctant individuals A MISSING INCOME IS BETTER THAN A FALSE ONE to assess, after the interview, the reliability of the income answers UNRELIABLE ANSWERS HAVE BEEN REMOVED

74 SELF-EMPLOYMENT INCOMES SURVEY SELF-EMPLOYMENT INCOMES the amount of self-employment income is asked after a reminder question that suggests a definition of income that is close to the: money drawn out concept

75 SELF-EMPLOYMENT INCOMES

76 SELF-EMPLOYMENT INCOMES

77 SELF-EMPLOYMENT INCOMES

78 SELF-EMPLOYMENT INCOMES

79 SELF-EMPLOYMENT INCOMES MAIN RESULTS With respect to the exclusive use of survey data, the linkage with administrative data has

80 SELF-EMPLOYMENT INCOMES MAIN RESULTS With respect to the exclusive use of survey data, the linkage with administrative data has increased substantially the number of percipients %

81 SELF-EMPLOYMENT INCOMES MAIN RESULTS With respect to the exclusive use of survey data, the linkage with administrative data has increased substantially the number of percipients % and the average self-employment income %

82 SELF-EMPLOYMENT INCOMES MAIN RESULTS With respect to the exclusive use of survey data, the linkage with administrative data has increased substantially the number of percipients and the average self-employment income Among the individuals for which both sources contain self-employment incomes, the record linkage reveals that under-estimation is more frequently observed in the tax data

83 SELF-EMPLOYMENT INCOMES Table 1 Gini decomposition of the self-employment incomes, by datasource and sub-group of percipients (all percipients of self-employment incomes in each datasource) SURVEY DATA TAX DATA FINAL DATA Overall Gini % % % - between groups % % % - within groups % % % - crossover % % % group specific Gini share of population share of income group specific Gini share of population share of income group specific Gini share of population share of income Employees % 2.4% % 7.7% % 5.6% Enterpreneurs % 12.2% % 9.5% % 11.6% Professionals % 24.8% % 27.4% % 23.4% Artisans/shopkeepers % 40.3% % 38.0% % 37.4% Co-helpers % 5.8% % 3.8% % 5.1% Coop. stockholders % 2.3% % 0.9% % 1.9% Co.co.co % 9.2% % 2.1% % 7.6% Unemployeds % 0.7% % 1.0% % 1.0% Other inactive % 2.4% % 9.6% % 6.4%

84 SELF-EMPLOYMENT INCOMES Table 1 Gini decomposition of the self-employment incomes, by datasource and sub-group of percipients (all percipients of self-employment incomes in each datasource) SURVEY DATA TAX DATA FINAL DATA Overall Gini % % % - between groups % % % - within groups % % % - crossover % % % group specific Gini share of population share of income group specific Gini share of population share of income group specific Gini share of population share of income Employees % 2.4% % 7.7% % 5.6% Enterpreneurs % 12.2% % 9.5% % 11.6% Professionals % 24.8% % 27.4% % 23.4% Artisans/shopkeepers % 40.3% % 38.0% % 37.4% Co-helpers % 5.8% % 3.8% % 5.1% Coop. stockholders % 2.3% % 0.9% % 1.9% Co.co.co % 9.2% % 2.1% % 7.6% Unemployeds % 0.7% % 1.0% % 1.0% Other inactive % 2.4% % 9.6% % 6.4% at the moment of the interview

85 SELF-EMPLOYMENT INCOMES Table 1 Gini decomposition of the self-employment incomes, by datasource and sub-group of percipients (all percipients of self-employment incomes in each datasource) SURVEY DATA TAX DATA FINAL DATA Overall Gini % % % - between groups % % % - within groups % % % - crossover % % % group specific Gini share of population share of income group specific Gini share of population share of income group specific Gini share of population share of income Employees % 2.4% % 7.7% % 5.6% Enterpreneurs % 12.2% % 9.5% % 11.6% Professionals % 24.8% % 27.4% % 23.4% Artisans/shopkeepers % 40.3% % 38.0% % 37.4% Co-helpers % 5.8% % 3.8% % 5.1% Coop. stockholders % 2.3% % 0.9% % 1.9% Co.co.co % 9.2% % 2.1% % 7.6% Unemployeds % 0.7% % 1.0% % 1.0% Other inactive % 2.4% % 9.6% % 6.4% In the tax file there is an higher proportion of percipients of secondary ( employees ) and of marginal/temporary ( unemployeds, other inactive ) self-employment incomes

86 SELF-EMPLOYMENT INCOMES Table 1 Gini decomposition of the self-employment incomes, by datasource and sub-group of percipients (all percipients of self-employment incomes in each datasource) SURVEY DATA TAX DATA FINAL DATA Overall Gini % % % - between groups % % % - within groups % % % - crossover % % % group specific Gini share of population share of income group specific Gini share of population share of income group specific Gini share of population share of income Employees % 2.4% % 7.7% % 5.6% Enterpreneurs % 12.2% % 9.5% % 11.6% Professionals % 24.8% % 27.4% % 23.4% Artisans/shopkeepers % 40.3% % 38.0% % 37.4% Co-helpers % 5.8% % 3.8% % 5.1% Coop. stockholders % 2.3% % 0.9% % 1.9% Co.co.co % 9.2% % 2.1% % 7.6% Unemployeds % 0.7% % 1.0% % 1.0% Other inactive % 2.4% % 9.6% % 6.4% as well as larger shares of the corresponding incomes

87 SELF-EMPLOYMENT INCOMES Table 1 Gini decomposition of the self-employment incomes, by datasource and sub-group of percipients (all percipients of self-employment incomes in each datasource) SURVEY DATA TAX DATA FINAL DATA Overall Gini % % % - between groups % % % - within groups % % % - crossover % % % group specific Gini share of population share of income group specific Gini share of population share of income group specific Gini share of population share of income Employees % 2.4% % 7.7% % 5.6% Enterpreneurs % 12.2% % 9.5% % 11.6% Professionals % 24.8% % 27.4% % 23.4% Artisans/shopkeepers % 40.3% % 38.0% % 37.4% Co-helpers % 5.8% % 3.8% % 5.1% Coop. stockholders % 2.3% % 0.9% % 1.9% Co.co.co % 9.2% % 2.1% % 7.6% Unemployeds % 0.7% % 1.0% % 1.0% Other inactive % 2.4% % 9.6% % 6.4% in both sources (and in the final data as well), these sub-groups are the ones with the highest degree of inequality

88 SELF-EMPLOYMENT INCOMES Table 1 Gini decomposition of the self-employment incomes, by datasource and sub-group of percipients (all percipients of self-employment incomes in each datasource) SURVEY DATA TAX DATA FINAL DATA Overall Gini % % % - between groups % % % - within groups % % % - crossover % % % group specific Gini share of population share of income group specific Gini share of population share of income group specific Gini share of population share of income Employees % 2.4% % 7.7% % 5.6% Enterpreneurs % 12.2% % 9.5% % 11.6% Professionals % 24.8% % 27.4% % 23.4% Artisans/shopkeepers % 40.3% % 38.0% % 37.4% Co-helpers % 5.8% % 3.8% % 5.1% Coop. stockholders % 2.3% % 0.9% % 1.9% Co.co.co % 9.2% % 2.1% % 7.6% Unemployeds % 0.7% % 1.0% % 1.0% Other inactive % 2.4% % 9.6% % 6.4% More generally, there is more inequality in the tax data (for all sub-groups)

89 SELF-EMPLOYMENT INCOMES Table 1 Gini decomposition of the self-employment incomes, by datasource and sub-group of percipients (all percipients of self-employment incomes in each datasource) SURVEY DATA TAX DATA FINAL DATA Overall Gini % % % - between groups % % % - within groups % % % - crossover % % % group specific Gini share of population share of income group specific Gini share of population share of income group specific Gini share of population share of income Employees % 2.4% % 7.7% % 5.6% Enterpreneurs % 12.2% % 9.5% % 11.6% Professionals % 24.8% % 27.4% % 23.4% Artisans/shopkeepers % 40.3% % 38.0% % 37.4% Co-helpers % 5.8% % 3.8% % 5.1% Coop. stockholders % 2.3% % 0.9% % 1.9% Co.co.co % 9.2% % 2.1% % 7.6% Unemployeds % 0.7% % 1.0% % 1.0% Other inactive % 2.4% % 9.6% % 6.4% That is why, in the final data, self-employment incomes are more unequally distributed w.r.t. survey data

90 SELF-EMPLOYMENT INCOMES Table 2 Records retained in the final dataset, by datasource and sub-group of percipients (all percipients of self-employment incomes in the final dataset) survey tax all Employees Enterpreneurs Professionals Artisans/shopkeepers Co-helpers Coop. stockholders Co.co.co Unemployeds Other inactive All In the final data, the majority of retained records for the marginal sub-groups of percipients of self-employment incomes ( employees, unemployeds and other inactive ) comes from the tax datasource

91 SELF-EMPLOYMENT INCOMES Table 2 Records retained in the final dataset, by datasource and sub-group of percipients (all percipients of self-employment incomes in the final dataset) survey tax all Employees Enterpreneurs Professionals Artisans/shopkeepers Co-helpers Coop. stockholders Co.co.co Unemployeds Other inactive All whilst the majority of retained records for the ordinary self-employed ( entrepreneurs, professionals, artisans etc.) comes from the survey

92 SELF-EMPLOYMENT INCOMES Table 2 Records retained in the final dataset, by datasource and sub-group of percipients (all percipients of self-employment incomes in the final dataset) survey tax all Employees Enterpreneurs Professionals Artisans/shopkeepers Co-helpers Coop. stockholders Co.co.co Unemployeds Other inactive All this means that, for these ordinary self-employed, survey data are usually higher than tax data (i.e. survey under-reporting is lower than the sum of tax evasion and tax avoidance)

93 SELF-EMPLOYMENT INCOMES Table 3 Content of the datasources, by sub-group of percipients (all percipients of self-employment incomes in the final dataset) reported TAX DATA not reported observed SURVEY DATA missing (imputed) NO to S.E. question FINAL DATA Employees Enterpreneurs none Professionals none Artisans/shopkeepers Co-helpers none Coop. stockholders none Co.co.co Unemployeds Other inactive All

94 SELF-EMPLOYMENT INCOMES Table 3 Content of the datasources, by sub-group of percipients (all percipients of self-employment incomes in the final dataset) reported TAX DATA not reported SURVEY DATA YES to S.E. missing observed question (imputed) NO to S.E. question FINAL DATA Employees Enterpreneurs none Professionals none Artisans/shopkeepers Co-helpers none Coop. stockholders none Co.co.co Unemployeds Other inactive All

95 SELF-EMPLOYMENT INCOMES Table 3 Content of the datasources, by sub-group of percipients (all percipients of self-employment incomes in the final dataset) reported TAX DATA not reported observed SURVEY DATA missing (imputed) NO to S.E. question FINAL DATA Employees Enterpreneurs none Professionals none Artisans/shopkeepers Co-helpers none Coop. stockholders none Co.co.co Unemployeds Other inactive All Both datasources miss a substantial amount of information

96 SELF-EMPLOYMENT INCOMES Table 3 Content of the datasources, by sub-group of percipients (all percipients of self-employment incomes in the final dataset) reported TAX DATA not reported observed SURVEY DATA missing (imputed) NO to S.E. question FINAL DATA Employees Enterpreneurs none Professionals none Artisans/shopkeepers Co-helpers none Coop. stockholders none Co.co.co Unemployeds Other inactive All Of all the percipients of self-employment incomes in the integrated dataset: 40.9% would have been ignored (or misclassified as percipients of pure capital incomes) by using exclusively the tax records

97 SELF-EMPLOYMENT INCOMES Table 3 Content of the datasources, by sub-group of percipients (all percipients of self-employment incomes in the final dataset) reported TAX DATA not reported observed SURVEY DATA missing (imputed) NO to S.E. question FINAL DATA Employees Enterpreneurs none Professionals none Artisans/shopkeepers Co-helpers none Coop. stockholders none Co.co.co Unemployeds Other inactive All Of all the percipients of self-employment incomes in the integrated dataset: 13.5% do not report themselves as percipients of self-employment incomes in the survey

98 SELF-EMPLOYMENT INCOMES Figure 1 Frequency distribution of self-employment incomes in the survey and in the final data final 12 survey 10 8 % thousands of euros

99 SELF-EMPLOYMENT INCOMES Figure 1 Frequency distribution of self-employment incomes in the survey and in the final data final 12 survey % The final (i.e. integrated) dataset contains a lower percentage of self-employment incomes in the range 2,000-12,000 per year thousands of euros

100 SELF-EMPLOYMENT INCOMES Figure 1 Frequency distribution of self-employment incomes in the survey and in the final data final 12 survey 10 8 The final (i.e. integrated) dataset contains % 6 and an higher proportion of incomes > 20, thousands of euros

101 FINAL REMARKS SURVEY DATA: miss most secondary self-employment incomes

102 FINAL REMARKS SURVEY DATA: miss most secondary self-employment incomes typical self-employment incomes are less likely to be underestimated w.r.t. tax data

103 FINAL REMARKS SURVEY DATA: miss most secondary self-employment incomes typical self-employment incomes are less likely to be underestimated w.r.t. tax data however, when they are lower than tax data, the difference is about 50% (about 2/5 of matching records)

104 FINAL REMARKS TAX DATA: do not always match the EU SILC definition

105 FINAL REMARKS TAX DATA: do not always match the EU SILC definition Because: 1. NON TAXABLE INCOME IS NOT ALWAYS REPORTED IN THE TAX RETURN

106 FINAL REMARKS TAX DATA: do not always match the EU SILC definition Because: 1. NON TAXABLE INCOME IS NOT ALWAYS REPORTED IN THE TAX RETURN 2. SOME SELF-EMPLOYMENT INCOMES (EU SILC definition) ARE CLASSIFIED IN THE TAX RETURN AS (i.e. maybe confused with) CAPITAL INCOMES OF SLEEPING PARTNERS

107 FINAL REMARKS TAX DATA: do not always match the EU SILC definition ordinary self-employment incomes are usually lower w.r.t. survey data (tax avoidance)

108 FINAL REMARKS TAX DATA: do not always match the EU SILC definition ordinary self-employment incomes are usually lower w.r.t. survey data (tax avoidance) when they are lower than survey data, the difference is also about 50% (about 3/5 of matching records)

109 FINAL REMARKS BYFUGLIEN (2001): Multi-country analysis of ECHP [ ] in no country administrative sources alone are sufficient for providing all necessary data for studying all specific aspects of poverty and social exclusion.

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111 FINAL REMARKS BYFUGLIEN (2001): Multi-country analysis of ECHP [ ] in no country administrative sources alone are sufficient for providing all necessary data for studying all specific aspects of poverty and social exclusion. A linked survey can also be necessary [ ] to identify non taxable income [ ]. That is what we has been done for the

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