In this thesis, we quantify the extent to which the self-employed systematically under-report their income in Iran households survey by using expenditure based method. The method applied is an improvement of Pissarides and Weber (1989) method which is based on the Engel curve, describing the relationship between incomes and expenditures. In this method, we can estimate the exact amount of average underreporting instead of offering estimation interval.The relationship between incomes and expenditures of wage and salary workers is used to infer the actual income, and thus the reporting gap, of the self-employed based on their reported expenditures. We find that the self-employed underreport...