A comparison of earnings measures from longitudinal and cross-sectional surveys: evidence from the UK

The paper compares earnings data from the British Household Panel Survey with those collected in the Family Resources Survey, using several measures, which account for various key aspects of the two surveys, and contrasting three different points in time (1995-1996, 2003-2004 and 2007-2008). We first perform non-parametric tests of equality at the centre of the distributions and over the whole earnings distributions. We then apply multivariate regression methods to establish whether the Family Resources Survey and British Household Panel Survey earnings data yield different results in relation to three typical uses of earnings data: the probability of being at the bottom or at the top of the distribution, the estimation of earnings functions both at the mean and at various quartiles and, using earnings as an explanatory variable, the probability of belonging to an occupational pension plan. Our analysis reveals that the two surveys have fairly similar earnings data in the first comparison year, whereas sizable and stable differences emerge in the later two comparisons. These findings are robust to the use of alternative definitions of earnings. They suggest the important role that is played by non-response and attrition between the first and the second comparison time points, and that played by 'learning-by-doing' effects in later data collections.