Modeling discrete choice with response error: Food stamp participation

Validation of Food Stamp program participation by Marquis and Moore revealed net bias of 13% in mean estimates of participation in the 1984 Survey of Income and Program Participation. We extend the analysis, incorporating demographic and economic covariates in models for underreporting and overreporting. We use the resulting models of response error to refine estimates of participation models using pseudo-maximum likelihood estimation methods. We find that the probability of underreporting rises with increased family income. Estimates of the participation model indicate the presence of substantial bias in income- and asset-related parameters compared to values obtained without incorporating response error.