‘What's in a Gauge?' an Assessment of Self-Reported Measures of Informal Activities

The relationship between different measures of informal activities is at best unpredictable. In theory, if one estimated the same reality, the outcome of different measures should point in the same direction. That remains unclear in the case of informal activities. This paper assesses self-reported survey measures of informal activities. If surveys measure informal activities in a reliable way, the possible applications are extensive. In comparison to national level macro-economic estimates, their potential is much bigger.

One source of bias in surveys is the respondents’ propensity to answer sensitive questions in a socially desirable way. This problem would be limited to the impact of the error terms on the condition that the bias were randomly and evenly distributed throughout the population. One possible consequential issue in questionnaire based measures of informal activities, however, is that the social desirability bias may be associated with certain group characteristics. In this contribution we will investigate the indication that the prevalence of the social desirability bias in a given population is positively associated with experiences with repressive government interventions. The lack of rule of law or of basic individual rights should influence the willingness to honestly disclose past illegitimate actions such as tax evasion off-the-books work by respondents.

Indeed, the disturbing fact is that the gap between macro-economic and survey based estimates of informal activities seems to be bigger in former communist regimes in Central Europe or repressive right wing governments. This paper tests the prediction that the social desirability bias in self-reported survey measures of informal economic activities depends on this institutional history. Based on the second round of the ESS, this thesis is tested with the help of comparison with other forms of (economic) deviance, the impact of generations to the social desirability bias and direct measures of negative attitudes toward informal activities.