The most frequently used method in the literature is via indirect estimates from observed expenditure data, building on Pissarides and Weber (1989), who use food expenditure survey data to estimate the underreporting of British self-employed. The consumption-based method- ology has been applied in a host of settings (Lyssiotou, Pashardes and Stengos (2004), Feldman and Slemrod (2007), Gorodnichenko, Martinez-Vazquez and Sabirianova (2009), Braguinsky, Mityakov and Liscovich (2010)). 5Although recently Hurst, Li, and Pugsley (2011) show that people underreport their income in surveys, adding to the selection complications of the survey method, our methodological contribution is about applicability, not necessarily about improv- ing on selection issues. The private data method provides.
