New method estimates household income bounds timely
Banca d'Italia researchers propose a novel set identification approach to produce timely estimates of average household income. Their method is robust to sample selection bias and provides results almost a year earlier than official statistics.
Timely income estimates from survey data
The paper introduces a novel set identification approach to estimate average household income, addressing sample selection bias from item non-response in surveys.
Using data from Banca d'Italia's Household Outlook Survey, the method generates timely estimates for Italian household income, available almost a year earlier than official EU-SILC releases.
The approach starts with wide nonparametric bounds based on income brackets, then progressively narrows the identified set by incorporating additional information such as unfolding brackets, exact income responses, and monotonicity assumptions.
This robust methodology covers a wide range of practical situations, making it broadly applicable where timely and unbiased income measures are crucial.
The identified bounds successfully contain the official EU-SILC estimate of average Italian household income, demonstrating its accuracy and practical utility.
HOS data and methodological refinements
The study utilizes data from Banca d'Italia's Household Outlook Survey (HOS), a bi-annual survey of 2,500 households selected from the larger Survey on Household Income and Wealth (SHIW).
The HOS collects timely information on household economic conditions, including income for 2023, using a set of three questions covering income brackets and exact income levels.
This data, available in May 2024, significantly predates the official EU-SILC microdata release in March 2025.
The method's strength lies in its ability to progressively narrow initial bounds.
For instance, combining brackets and levels halves the width compared to using brackets alone.
Further, imposing monotonicity assumptions, such as income increasing with educational attainment, narrows the bounds by up to 25%.
This yields a range of [28,602; 31,460] euros for average Italian household income in 2023, consistent with EU-SILC's 31,356 euros.
Precision meets practicality
This research offers a crucial tool for policymakers and researchers needing rapid, yet reliable, income statistics.
By effectively mitigating non-response bias and providing early estimates, it addresses a significant data gap in economic analysis.
However, the remaining width of the identified bounds underscores the inherent challenges in precise income measurement, even with advanced methodologies.