MI Double Feature: Multiple Imputation to Address Nonresponse and Rounding Errors in Income Questions

Obtaining reliable income information in surveys is difficult for two reasons. On the one hand, many survey respondents consider income to be sensitive information and thus are reluctant to answer questions regarding their income. If those survey participants that do not provide information on their income are systematically different from the respondents (and there is ample of research indicating that they are) results based only on the observed income values will be misleading. On the other hand, respondents tend to round their income. Especially this second source of error is usually ignored when analyzing the income information. In a recent paper, Drechsler and Kiesl (2014) illustrated that inferences based on the collected information can be biased if the rounding is ignored and suggested a multiple imputation strategy to account for the rounding in reported income. In this paper we extend their approach to also address the nonresponse problem. We illustrate the approach using the household income variable from the German panel study "Labor Market and Social Security".