Self-reported income data: are people telling the truth?

Abstract

Purpose: This paper aims to detect anomalous data in income reports of Argentina, including personal income – from a sample of households – and statements of public officials. Design/methodology/approach: A widely known technique in forensic accounting – such as Benford’s Law – is used. The Chi-square test and the absolute mean deviation are used for verification. The databases consulted include the income declared by households in the Permanent Household Survey – for the 2003-2017 period – and the capital declarations of high-ranking public officials – for the period 1999-2017. Findings: The results suggest that income reported in the Encuesta Permanente de Hogares do not follow a Benford´s distribution, and the degree of conformity with this decreases significantly between 2007 and 2015 – coincident with the intervention period of the Instituto Nacional de Estadísticas y Censos. Patrimonial statements of public officials present an acceptable level of compliance with Benford’s law, especially among those of the legislative branch (in more than 90% of cases) although to a lesser extent among officials of the executive branch. Practical implications: The results suggest that income reports from the Permanent Household Survey, for the period 2007-2015, should be used with reservations because of their possible manipulation. Originality/value: During the intervention of the official statistics institute in Argentina (2007-2015), the idea of lack of credibility of its reports has been disseminated. To date, however, there is no empirical evidence to support it related to income.