CEP/STICERD Applications Seminars
New Work or Changes in Reporting? A Framework for Measuring Self-Employment Trends in Administrative Data
Dmitri Koustas (Chicago)
Monday 07 June 2021 12:00 - 13:30
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About this event
Changes in self-employment rates may reflect changes in the structure of the labor market and the extent of entrepreneurial activity in the broader economy. Increasingly, researchers are looking to administrative tax measures of self-employment. Puzzlingly, the share of workers reporting self-employment earnings on tax forms in the United States has grown faster than either self-employment activity reported in workforce surveys or the number of independent contractors and “gig” workers with taxable earnings as reported by firms. We document that growth in self-employment captured in administrative records appears to be driven by a subset of parents who face negative marginal tax rates if they report self-employment income. We employ a Regression Discontinuity Design (RDD) that compares households whose children are born in December of the current tax year–and hence make the tax unit eligible for these incentives–with households whose children are born just a few days later and therefore have no reporting incentives. We find a sizable increase in reporting self-employment among the December births whose only logical interpretation is strategic reporting. We present a new framework to adjust trends in self-employment tax filings for changes in reporting behaviors to extract true underlying trends in the composition of the workforce. These adjustments lower raw trends in administrative self-employment growth in the U.S. over the period 2000-2018 by over 80 percent. Our new self-employment series adjusted for reporting trends, as well as our new series on gig work, should be valuable to other researchers studying self-employment.
This series is part of the CEP's Labour Markets programme.