Measurement error in imputation procedures

We study how estimators that are used to impute consumption in survey data are inconsistent due to measurement error in consumption. Previous research suggests instrumenting consumption to overcome this problem. We show that, if additional regressors are present, then instrumenting consumption may still produce inconsistent estimators due to the likely correlation between additional regressors and measurement error. On the other hand, low correlations between additional regressors and instruments may reduce bias due to measurement error. We apply our findings by revisiting recent research that imputes consumption data from the CEX to the PSID. (C) 2013 Elsevier B.V. All rights reserved.We acknowledge nancial support by the Spanish Ministerio de Ciencia y Tecnolog a (grants ECO2009-13169 and ECO2009-11165) and Ministerio de Econom a y Competitividad (grants ECO2012-38134 and ECO2012-31358)Publicad