N ational T ransfer A ccounts 1 National Transfer Accounts: Private Transfers Marjorie Pajaron University of Hawaii at Manoa & East-West Center.

NNational ational TTransfer ransfer AAccountsccounts11

National Transfer National Transfer Accounts: Private Accounts: Private TransfersTransfers

Marjorie PajaronMarjorie Pajaron

University of Hawaii at ManoaUniversity of Hawaii at Manoa

& East-West Center& East-West Center

National Transfer Accounts2

The Flow Account IdentityThe Flow Account Identity


A Classification of NTA Reallocations.A Classification of NTA Reallocations.

Asset-based Age ReallocationsAsset-based Age Reallocations

TransfersTransfers

Capital and Other Capital and Other Non-Financial Non-Financial

AssetsAssets CreditCredit

PublicPublicPublic infrastructurePublic infrastructurePublic land and sub-Public land and sub-soil mineralssoil minerals

Public debtPublic debtStudent Student loansloans

MoneyMoney

Public educationPublic educationPublic health carePublic health care

Unfunded pension plansUnfunded pension plans

PrivatePrivate

HousingHousingConsumer durablesConsumer durables

Factories, FarmsFactories, FarmsPrivate land and Private land and sub-soil mineralssub-soil minerals

InventoriesInventories

Consumer Consumer creditcredit

Familial support of Familial support of children and parentschildren and parents

BequestsBequestsCharitable contributionsCharitable contributions

Source: Mason, Lee et al. (forthcoming); adapted from Lee (1994).Source: Mason, Lee et al. (forthcoming); adapted from Lee (1994).


NT Flow Account, Aggregate. TaiwanNT Flow Account, Aggregate. Taiwan, 1998 (NT$ billion), , 1998 (NT$ billion), nominalnominal

AgeAge

TotalTotal 0-190-19 20-2920-29 30-4930-49 50-6450-64 65+65+

ReallocationsReallocations 832832 1,7041,704 77 -1,329-1,329 2525 424424

Asset-based Asset-based reallocationsreallocations 861861 -5-5 -26-26 499499 181181 213213

Income on AssetsIncome on Assets 2,4562,456 44 175175 1,5391,539 528528 211211

Less: SavingLess: Saving 1,5951,595 99 201201 1,0401,040 347347 -2-2

TransfersTransfers -29-29 1,7101,710 3333 -1,828-1,828 -155-155 211211

PublicPublic 22 611611 5151 -673-673 -103-103 116116

PrivatePrivate -31-31 1,0991,099 -18-18 -1,155-1,155 -52-52 9595Note. Some columns do not total because of rounding.

Net transfers consist of public transfers (cash transfers + in-kind transfers less taxes) and private transfers (mostly familial transfers). Positive values imply that inflows exceed outflows.


OutlineOutline

I.I. Private TransfersPrivate Transfers

II.II. Inter-household TransfersInter-household Transfers

III.III. Intra-household TransfersIntra-household Transfers

IV.IV. SummarySummary


I. Private TransfersI. Private Transfers


I. Private TransfersI. Private Transfers► Members of one age group provide Members of one age group provide

economic resources to members of another economic resources to members of another age group, which is mediated by the age group, which is mediated by the households and non-profit institutions households and non-profit institutions serving household sector (NPISH)serving household sector (NPISH)

► Motives for private transfers are not Motives for private transfers are not determineddetermined

► ““Flows that involve no Flows that involve no explicitexplicit quid pro quid pro quo.”quo.”

► ““Private transfers must balance, i.e., inflows Private transfers must balance, i.e., inflows = outflows in total.”= outflows in total.”



►Private transfer function: individuals Private transfer function: individuals give and receive transfersgive and receive transfers Inter-household transfersInter-household transfers Intra-household transfersIntra-household transfers Capital transfers, e.g., bequest, dowries, Capital transfers, e.g., bequest, dowries,

etc.etc.




II. Inter-household II. Inter-household TransfersTransfers


II. Inter-household TransfersII. Inter-household Transfers

► Transfer of resources to and from other Transfer of resources to and from other households, NPISH and ROW households, NPISH and ROW

► Held by the household headHeld by the household head► Steps for constructing age profile:Steps for constructing age profile:

1) Use household survey data and make sure there 1) Use household survey data and make sure there is only one household head;is only one household head;

2) For inflows, look for variable that measures the 2) For inflows, look for variable that measures the transfers from other household, individuals, and transfers from other household, individuals, and NPISH NPISH * (e.g. remittances received from other * (e.g. remittances received from other households, charities from church, etc.)households, charities from church, etc.)



► Steps for constructing age profile:Steps for constructing age profile:3.3. For outflows, look for variable that For outflows, look for variable that measures the transfers to other household, measures the transfers to other household, individuals, and NPISH individuals, and NPISH * (e.g. donations to * (e.g. donations to churches, charities, etc. )churches, charities, etc. )4. Tabulate these variables by age of head 4. Tabulate these variables by age of head making sure that you use weightsmaking sure that you use weights5. 5. Smooth the age profileSmooth the age profile6. Adjust the age profiles to match the 6. Adjust the age profiles to match the macro control macro control **



► Inflows = Outflows if there are no inflows Inflows = Outflows if there are no inflows from or outflows to other countries.from or outflows to other countries.

►Private Transfer macro control is Private Transfer macro control is attributed to net inter-household attributed to net inter-household transfers since intra-household transfer transfers since intra-household transfer must net to zero. must net to zero.

►Remittances are considered as inter-Remittances are considered as inter-household transfers (true for Mexico and household transfers (true for Mexico and partially for the Philippines).partially for the Philippines).


II. Inter-household TransfersII. Inter-household Transfers3 Methods in Adjusting Inter-HH Inflows and Outflows if total inflows are not equal to total outflows3 Methods in Adjusting Inter-HH Inflows and Outflows if total inflows are not equal to total outflows

1. One multiplicative 1. One multiplicative adjustment factor for inflows adjustment factor for inflows & outflows& outflows

2. One multiplicative 2. One multiplicative adjustment factor for inflows adjustment factor for inflows & one for outflows& one for outflows

3. Adjusting either inflows or 3. Adjusting either inflows or outflows, but not bothoutflows, but not both



References:References:(1)(1) Additional notes for private transfer Additional notes for private transfer

methodology:methodology: http://www.schemearts.com/proj/nta/web/nta/repohttp://www.schemearts.com/proj/nta/web/nta/repository/Private_Transfer_Notessitory/Private_Transfer_Notes

(2) Taiwan STATA code:(2) Taiwan STATA code:<See Share drive><See Share drive>

http://www.schemearts.com/proj/nta/web/nta/repository/Private_Transfer_Notes







III. Intra-household III. Intra-household TransfersTransfers


III. Intra-household TransfersIII. Intra-household Transfers► Indirectly measured by comparing Indirectly measured by comparing

estimates of the consumption of each estimates of the consumption of each individual with the income of each individual with the income of each individual. individual.

► Transfers for current consumption – when Transfers for current consumption – when members incur current deficits (disposable members incur current deficits (disposable Y < current C) they receive transfer Y < current C) they receive transfer inflows from members who have current inflows from members who have current surplus (disposable Y > current C) .surplus (disposable Y > current C) .

► Inflows and outflows depend on surpluses Inflows and outflows depend on surpluses and deficits of each member not on and deficits of each member not on individual characteristics such as age.individual characteristics such as age.


III. Intra-household TransfersIII. Intra-household Transfers

►Disposable income (YD)Disposable income (YD)YD = Labor Income + Public Cash Transfer YD = Labor Income + Public Cash Transfer Inflows – Taxes Paid (Inflows – Taxes Paid (Including Indirect Tax Including Indirect Tax on Consumptionon Consumption) + Net inter-household ) + Net inter-household transfers transfers + Public Asset Income – Public + Public Asset Income – Public Saving (in green font, to be verified)Saving (in green font, to be verified)


III. Intra-household TransfersIII. Intra-household Transfers►Methodology in estimating the age Methodology in estimating the age

profile of intra-household transfersprofile of intra-household transfers Preparation of DataPreparation of Data Transfers for Current ConsumptionTransfers for Current Consumption Transfers of Remaining Surplus to HeadTransfers of Remaining Surplus to Head Transfers for Durable ConsumptionTransfers for Durable Consumption

►Graphical IllustrationsGraphical Illustrations►Example of intra-household transfers Example of intra-household transfers

age profilesage profiles


III.1 Preparation of DataIII.1 Preparation of Data1.1. Using the household survey, the following Using the household survey, the following

unsmoothed variables adjusted to unsmoothed variables adjusted to control control totals totals should be available (should be available (assuming a single assuming a single survey has all the necessary variablessurvey has all the necessary variables):):(a) labor income (a) labor income (b) current consumption sectors – education, health, (b) current consumption sectors – education, health, other other (c) durable consumption sectors – housing, other(c) durable consumption sectors – housing, other

(d) public cash transfers(d) public cash transfers (e) public asset income (to be verified)(e) public asset income (to be verified) (f) public saving (to be verified)(f) public saving (to be verified)

(g) taxes paid (g) taxes paid (including indirect tax on consumption)*(including indirect tax on consumption)*(h) inter-household transfers (h) inter-household transfers


III.1 Preparation of DataIII.1 Preparation of Data1. Unsmoothed variables adjusted to control 1. Unsmoothed variables adjusted to control

totals (single survey used)totals (single survey used)2. What to do if variables come from two (or 2. What to do if variables come from two (or

more) survey problem more) survey problem (?)(?)a) Choose one survey that has household head and a) Choose one survey that has household head and age of all membersage of all membersb) Assign control total-adjusted profile values (from b) Assign control total-adjusted profile values (from other surveys) to each individual based on ageother surveys) to each individual based on agec) Apply intra-household transfer methodology c) Apply intra-household transfer methodology using the assigned profile instead of survey using the assigned profile instead of survey responses.responses.

3. Only one household head per household3. Only one household head per household4. Consumption values must be non-negative4. Consumption values must be non-negative


III.2 Transfers for Current III.2 Transfers for Current ConsumptionConsumption

1.1. Compute for surplus/deficit for each member Compute for surplus/deficit for each member ii in in household household j j and total surplus/deficit for and total surplus/deficit for household household j j (*)(*)

Surplus (Surplus (i,ji,j) if (Disposable Y (i,j) - Total Current C(i,j)) ) if (Disposable Y (i,j) - Total Current C(i,j)) > > 00

Deficit (Deficit (i,ji,j) if (Disposable Y(i,j) - Total Current C(i,j))) if (Disposable Y(i,j) - Total Current C(i,j)) < 0 < 0

2.2. Compute for total surplus/deficit for household Compute for total surplus/deficit for household jj

Shortfall exists for household (Shortfall exists for household (jj) if the total deficit in ) if the total deficit in household (j) > total surplus in household (j) household (j) > total surplus in household (j)


III.2 Transfers for Current III.2 Transfers for Current ConsumptionConsumption3.3. Calculate the tax rateCalculate the tax rate

Tax rate varies across households but is Tax rate varies across households but is independent of the age of the individual within the independent of the age of the individual within the household. household.

Flat-rate tax is imposed on each member’s surplus Flat-rate tax is imposed on each member’s surplus income and this taxed surplus is transferred to income and this taxed surplus is transferred to support current consumption of other members. support current consumption of other members. (*)(*)

Tax (j) = min (1, Deficit (j) / Surplus (j) ) Tax (j) = min (1, Deficit (j) / Surplus (j) ) Deficit (j) = total deficits of all household members in household jDeficit (j) = total deficits of all household members in household j

Surplus (j) = total surpluses of all household members in household jSurplus (j) = total surpluses of all household members in household j


III.2 III.2 Transfers for Current Transfers for Current ConsumptionConsumption4. 4. Compute for intra-household outflows for Compute for intra-household outflows for

current consumptioncurrent consumption Non-heads transfer resources to other members Non-heads transfer resources to other members

equal to their taxed surplus equal to their taxed surplus Heads transfer resources to household Heads transfer resources to household

members equal to their taxed surplus and any members equal to their taxed surplus and any shortfall that he/she finances through asset shortfall that he/she finances through asset income or dis-saving, excluding his/her own income or dis-saving, excluding his/her own deficit deficit (*)(*) (show numerical example) (show numerical example)

HeadsHeads Non-headsNon-headsOutflows = Tax(j) * Outflows = Tax(j) * Surplus of head + Shortfall Surplus of head + Shortfall (j) - Deficit of head(j) - Deficit of head

Outflows = Tax(j) * Outflows = Tax(j) * Surplus of non-headSurplus of non-head


III.2 III.2 Transfers for Current Transfers for Current ConsumptionConsumption5. Compute for intra-household inflows and 5. Compute for intra-household inflows and

outflows for current consumption by outflows for current consumption by sector.sector.

Transfers received by non-head in each current Transfers received by non-head in each current consumption sector is equal to the proportion of that consumption sector is equal to the proportion of that sector to his total current consumption.sector to his total current consumption.

Household head has the same calculation except that Household head has the same calculation except that he/she has to finance his/her own deficit through he/she has to finance his/her own deficit through asset income or dis-saving, which is not recorded as asset income or dis-saving, which is not recorded as transfer (when shortfall exists for the household). transfer (when shortfall exists for the household). (*)(*)HeadsHeads

* true for all sectors* true for all sectors

Non-heads Non-heads * true for all sectors* true for all sectors

Inflows Education = Inflows Education = (Education (i)/Total Current (Education (i)/Total Current Consumption (i)) * max [0, Consumption (i)) * max [0, Deficit of head – Shortfall of Deficit of head – Shortfall of household]household]

Inflows Education = Inflows Education = (Education (i)/Total Current (Education (i)/Total Current Consumption (i)) * Deficit of Consumption (i)) * Deficit of non-headsnon-heads


III.2 III.2 Transfers for Current Transfers for Current ConsumptionConsumption► Current transfer outflows from individual (Current transfer outflows from individual (ii) )

in each current consumption sector are in each current consumption sector are proportional to the total household inflows to proportional to the total household inflows to each sector.each sector.

HeadsHeads* true for all sectors* true for all sectors

Non-heads Non-heads * true for all sectors* true for all sectors

Outflows Education = (Education Outflows Education = (Education (j)/Total Current Consumption (j)/Total Current Consumption Inflows (j)) * Total Outflows (i)Inflows (j)) * Total Outflows (i)

Outflows Education = (Education Outflows Education = (Education (j)/Total Current Consumption (j)/Total Current Consumption Inflows (j)) * Total Outflows (i)Inflows (j)) * Total Outflows (i)


III.2 III.2 Transfers for Current Transfers for Current ConsumptionConsumption►To verify if the calculations are To verify if the calculations are

correct: correct:

total inflows = total outflows total inflows = total outflows

(for each sector, by household, and in (for each sector, by household, and in aggregate) aggregate) **


II. Intra-household TransfersII. Intra-household Transfers

References:References:(1)(1) Private Transfers document in NTA website:Private Transfers document in NTA website:

http://www.schemearts.com/proj/nta/web/nta/shohttp://www.schemearts.com/proj/nta/web/nta/show/Documents/Private%20Transfersw/Documents/Private%20Transfers

(2)(2) Additional notes for private transfer Additional notes for private transfer methodology:methodology: http://www.schemearts.com/proj/nta/web/nta/repohttp://www.schemearts.com/proj/nta/web/nta/repository/Private_Transfer_Notessitory/Private_Transfer_Notes

(3) Taiwan STATA code:(3) Taiwan STATA code:

<See Share drive><See Share drive>

(4) Intra-household Example: (4) Intra-household Example: < See Share < See Share Drive>Drive>

http://www.schemearts.com/proj/nta/web/nta/show/Documents/Private%20Transfers

http://www.schemearts.com/proj/nta/web/nta/show/Documents/Private%20Transfers




III.2 III.2 Transfers for Current Transfers for Current ConsumptionConsumption






III.3 Transfers of Remaining Surplus to III.3 Transfers of Remaining Surplus to HeadHead1.1. Any surplus held by non-heads that is not Any surplus held by non-heads that is not

used for current consumption transfers is used for current consumption transfers is transferred to the head to be saved. transferred to the head to be saved. (Outflows for non-heads, (Outflows for non-heads, TFWSO)TFWSO)

2.2. The head receives all the excess surplus. The head receives all the excess surplus. (Inflows to heads, TFWSI)(Inflows to heads, TFWSI) **

HeadsHeads Non-headsNon-headsTFWSO = 0TFWSO = 0 TFWSO = Surplus – Transfers TFWSO = Surplus – Transfers

for current consumptionfor current consumption

TFWSI = Sum of all excess TFWSI = Sum of all excess surplus transferred from non-surplus transferred from non-headsheads

TFWSI = 0TFWSI = 0


III.3 Transfers of Remaining Surplus to III.3 Transfers of Remaining Surplus to HeadHead


II.4 Transfers for Durable II.4 Transfers for Durable ConsumptionConsumption► Transfers for Owner-Occupied HousingTransfers for Owner-Occupied Housing

Household head holds all the assets (including Household head holds all the assets (including services from owner-occupied housing) by services from owner-occupied housing) by assumption. Consumption of housing for non-assumption. Consumption of housing for non-head member (living in owner-occupied housing) head member (living in owner-occupied housing) is financed by transfers from headis financed by transfers from head

► Transfers for Other Durable GoodsTransfers for Other Durable Goods If consumption of durable goods is calculated as If consumption of durable goods is calculated as

a flow from existing durable goods, non-head a flow from existing durable goods, non-head members receive transfers from head equal to members receive transfers from head equal to the value of member’s durable consumption (just the value of member’s durable consumption (just like the treatment for owner-occupied housing).like the treatment for owner-occupied housing).


III.4 Transfers for Durable III.4 Transfers for Durable ConsumptionConsumption1.1. Transfers for durable (asset) consumption Transfers for durable (asset) consumption

(housing, and other durable consumption)(housing, and other durable consumption) flow from head to non-heads.flow from head to non-heads.

2.2. Non-heads receive transfers equal to their Non-heads receive transfers equal to their durable consumption.durable consumption.

HeadsHeads Non-headsNon-headsOutflows = Durable Outflows = Durable Consumption of non-headsConsumption of non-heads

Outflows = 0Outflows = 0

Inflows = 0Inflows = 0 Inflows = Durable Inflows = Durable ConsumptionConsumption


II.4 II.4 Transfers for Durable Transfers for Durable ConsumptionConsumption


SummarySummary1. Importance of Private Transfers1. Importance of Private Transfers

2. Inter-household Transfers and how to handle remittances2. Inter-household Transfers and how to handle remittances

3. Intra-household Transfers3. Intra-household Transfers

a. Transfers for Current Consumptiona. Transfers for Current Consumption

b. Transfers for Durable Consumptionb. Transfers for Durable Consumption

c. Transfers of Remaining Surplus to Headc. Transfers of Remaining Surplus to Head

NNational ational TTransfer ransfer AAccountsccounts4040

The EndThe End

N ational T ransfer A ccounts 1 National Transfer Accounts: Private Transfers Marjorie Pajaron University of Hawaii at Manoa & East-West Center.

Documents

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net transfers

n ational t ransfer

familial transfers

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inkind transfers

intrahousehold transfers

intra household transfer