Social Distance and Informal Employment Reporting

Measuring illicit behavior such as tax evasion and underground economy through surveys is challenging due to social desirability bias. We examine how interviewer–respondent social distance affects the reporting of informal employment in an anonymous survey conducted by university students. Using variation in the relationship between interviewer and respondent, we estimate probit models and find that disclosure is lowest when the interviewer is a relative or friend, and higher when the interviewer is either an immediate family member or someone with no prior connection. This non-monotonic pattern suggests that both trust and anonymity facilitate truthful reporting, while intermediate social proximity increases self-censorship. The findings highlight a previously overlooked source of measurement error in survey-based estimates of informal labor.