National Transfer Accounts: Private Transfers

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National Transfer Accounts Private Transfers

• Marjorie Pajaron
• University of Hawaii at Manoa
• East-West Center

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The Flow Account Identity
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A Classification of NTA Reallocations. A Classification of NTA Reallocations. A Classification of NTA Reallocations. A Classification of NTA Reallocations.
Asset-based Age Reallocations Asset-based Age Reallocations Transfers
Capital and Other Non-Financial Assets Credit Transfers
Public Public infrastructure Public land and sub-soil minerals Public debt Student loans Money Public education Public health care Unfunded pension plans
Private Housing Consumer durables Factories, Farms Private land and sub-soil minerals Inventories Consumer credit Familial support of children and parents Bequests Charitable contributions
Source Mason, Lee et al. (forthcoming) adapted from Lee (1994). Source Mason, Lee et al. (forthcoming) adapted from Lee (1994). Source Mason, Lee et al. (forthcoming) adapted from Lee (1994). Source Mason, Lee et al. (forthcoming) adapted from Lee (1994).
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NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal
Age Age Age Age Age
  Total 0-19 20-29 30-49 50-64 65
Reallocations 832 1,704 7 -1,329 25 424
Asset-based reallocations 861 -5 -26 499 181 213
Income on Assets 2,456 4 175 1,539 528 211
Less Saving 1,595 9 201 1,040 347 -2
Transfers -29 1,710 33 -1,828 -155 211
Public 2 611 51 -673 -103 116
Private -31 1,099 -18 -1,155 -52 95
Note. 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.
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Outline

1. Private Transfers
2. Inter-household Transfers
3. Intra-household Transfers
4. Summary

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• I. Private Transfers

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I. Private Transfers

• Members of one age group provide economic
  resources to members of another age group, which
  is mediated by the households and non-profit
  institutions serving household sector (NPISH)
• Motives for private transfers are not determined
• Flows that involve no explicit quid pro quo.
• Private transfers must balance, i.e., inflows
  outflows in total.

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I. Private Transfers

• Private transfer function individuals give and
  receive transfers
• Inter-household transfers
• Intra-household transfers
• Capital transfers, e.g., bequest, dowries, etc.

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I. Private Transfers
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• II. Inter-household Transfers

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II. Inter-household Transfers

• Transfer of resources to and from other
  households, NPISH and ROW
• Held by the household head
• Steps for constructing age profile
• 1) Use household survey data and make sure there
  is only one household head
• 2) For inflows, look for variable that measures
  the transfers from other household, individuals,
  and NPISH (e.g. remittances received from other
  households, charities from church, etc.)

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II. Inter-household Transfers

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

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II. Inter-household Transfers

• Inflows Outflows if there are no inflows from
  or outflows to other countries.
• Private Transfer macro control is attributed to
  net inter-household transfers since
  intra-household transfer must net to zero.
• Remittances are considered as inter-household
  transfers (true for Mexico and partially for the
  Philippines).

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II. Inter-household Transfers

• 3 Methods in Adjusting Inter-HH Inflows and
  Outflows if total inflows are not equal to total
  outflows

1. One multiplicative adjustment factor for inflows outflows
2. One multiplicative adjustment factor for inflows one for outflows
3. Adjusting either inflows or outflows, but not both
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II. Inter-household Transfers
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II. Inter-household Transfers
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II. Inter-household Transfers
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• III. Intra-household Transfers

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III. Intra-household Transfers

• Indirectly measured by comparing estimates of the
  consumption of each individual with the income of
  each individual.
• Transfers for current consumption when members
  incur current deficits (disposable Y lt current C)
  they receive transfer inflows from members who
  have current surplus (disposable Y gt current C) .
• Inflows and outflows depend on surpluses and
  deficits of each member not on individual
  characteristics such as age.

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III. Intra-household Transfers

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

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III. Intra-household Transfers

• Methodology in estimating the age profile of
  intra-household transfers
• Preparation of Data
• Transfers for Current Consumption
• Transfers of Remaining Surplus to Head
• Transfers for Durable Consumption
• Graphical Illustrations
• Example of intra-household transfers age profiles

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III.1 Preparation of Data

• Using the household survey, the following
  unsmoothed variables adjusted to control totals
  should be available (assuming a single survey has
  all the necessary variables)
• (a) labor income
• (b) current consumption sectors education,
  health, other
• (c) durable consumption sectors housing, other
• (d) public cash transfers
• (e) public asset income (to be verified)
• (f) public saving (to be verified)
• (g) taxes paid (including indirect tax on
  consumption)
• (h) inter-household transfers

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III.1 Preparation of Data

• 1. Unsmoothed variables adjusted to control
  totals (single survey used)
• 2. What to do if variables come from two (or
  more) survey problem (?)
• a) Choose one survey that has household head and
  age of all members
• b) Assign control total-adjusted profile values
  (from other surveys) to each individual based on
  age
• c) Apply intra-household transfer methodology
  using the assigned profile instead of survey
  responses.
• 3. Only one household head per household
• 4. Consumption values must be non-negative

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III.2 Transfers for Current Consumption

• 1. Compute for surplus/deficit for each member i
  in household j and total surplus/deficit for
  household j ()
• Surplus (i,j) if (Disposable Y (i,j) - Total
  Current C(i,j)) gt 0
• Deficit (i,j) if (Disposable Y(i,j) - Total
  Current C(i,j)) lt 0
• 2. Compute for total surplus/deficit for
  household j
• Shortfall exists for household (j) if the total
  deficit in household (j) gt total surplus in
  household (j)

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III.2 Transfers for Current Consumption

• 3. Calculate the tax rate
• Tax rate varies across households but is
  independent of the age of the individual within
  the household.
• Flat-rate tax is imposed on each members surplus
  income and this taxed surplus is transferred to
  support current consumption of other members. ()
• Tax (j) min (1, Deficit (j) / Surplus (j) )
• Deficit (j) total deficits of all household
  members in household j
• Surplus (j) total surpluses of all household
  members in household j

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III.2 Transfers for Current Consumption

• 4. Compute for intra-household outflows for
  current consumption
• Non-heads transfer resources to other members
  equal to their taxed surplus
• Heads transfer resources to household members
  equal to their taxed surplus and any shortfall
  that he/she finances through asset income or
  dis-saving, excluding his/her own deficit

Heads Non-heads
Outflows Tax(j) Surplus of head Shortfall (j) - Deficit of head Outflows Tax(j) Surplus of non-head
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III.2 Transfers for Current Consumption

• 5. Compute for intra-household inflows and
  outflows for current consumption by sector.
• Transfers received by non-head in each current
  consumption sector is equal to the proportion of
  that sector to his total current consumption.
• Household head has the same calculation except
  that he/she has to finance his/her own deficit
  through asset income or dis-saving, which is not
  recorded as transfer (when shortfall exists for
  the household). ()

Heads true for all sectors Non-heads true for all sectors
Inflows Education (Education (i)/Total Current Consumption (i)) max 0, Deficit of head Shortfall of household Inflows Education (Education (i)/Total Current Consumption (i)) Deficit of non-heads
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III.2 Transfers for Current Consumption

• Current transfer outflows from individual (i) in
  each current consumption sector are proportional
  to the total household inflows to each sector.

Heads true for all sectors Non-heads true for all sectors
Outflows Education (Education (j)/Total Current Consumption Inflows (j)) Total Outflows (i) Outflows Education (Education (j)/Total Current Consumption Inflows (j)) Total Outflows (i)
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III.2 Transfers for Current Consumption

• To verify if the calculations are correct
• total inflows total outflows
• (for each sector, by household, and in
  aggregate)

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II. Intra-household Transfers
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III.2 Transfers for Current Consumption
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III.2 Transfers for Current Consumption
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III.2 Transfers for Current Consumption
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III.3 Transfers of Remaining Surplus to Head

1. Any surplus held by non-heads that is not used
   for current consumption transfers is transferred
   to the head to be saved.
   (Outflows for non-heads, TFWSO)
2. The head receives all the excess surplus.
   (Inflows to heads, TFWSI)

Heads Non-heads
TFWSO 0 TFWSO Surplus Transfers for current consumption
TFWSI Sum of all excess surplus transferred from non-heads TFWSI 0
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III.3 Transfers of Remaining Surplus to Head
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II.4 Transfers for Durable Consumption

• Transfers for Owner-Occupied Housing
• Household head holds all the assets (including
  services from owner-occupied housing) by
  assumption. Consumption of housing for non-head
  member (living in owner-occupied housing) is
  financed by transfers from head
• Transfers for Other Durable Goods
• If consumption of durable goods is calculated as
  a flow from existing durable goods, non-head
  members receive transfers from head equal to the
  value of members durable consumption (just like
  the treatment for owner-occupied housing).

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III.4 Transfers for Durable Consumption

1. Transfers for durable (asset) consumption
   (housing, and other durable consumption) flow
   from head to non-heads.
2. Non-heads receive transfers equal to their
   durable consumption.

Heads Non-heads
Outflows Durable Consumption of non-heads Outflows 0
Inflows 0 Inflows Durable Consumption
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II.4 Transfers for Durable Consumption
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Summary

• 1. Importance of Private Transfers
• 2. Inter-household Transfers and how to handle
  remittances
• 3. Intra-household Transfers
• a. Transfers for Current Consumption
• b. Transfers for Durable Consumption
• c. Transfers of Remaining Surplus to Head

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Acknowledgement

• Support for this project has been provided by the
  following institutions
• the John D. and Catherine T. MacArthur
  Foundation
• the National Institute on Aging NIA,
  R37-AG025488 and NIA, R01-AG025247
• the International Development Research Centre
  (IDRC)
• the United Nations Population Fund (UNFPA)
• the Academic Frontier Project for Private
  Universities matching fund subsidy from MEXT
  (Ministry of Education, Culture, Sports, Science
  and Technology), 2006-10, granted to the Nihon
  University Population Research Institute.

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The End