Transcript The Lifecycle Deficit: A Review

The Lifecycle Deficit:
A Review
Sang-Hyop Lee
University of Hawaii at Manoa
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National Transfer Accounts
Consumption and Labor Income, Per Capita
The Economic Lifecycle (per capita)
1.200
1.000
Labor Income
0.800
Consumption
0.600
0.400
0.200
0.000
0
10
20
30
40
50
60
70
80
90+
Age
Note. Values normalized on per capita labor income of persons 30-49.
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National Transfer Accounts
Assumptions
► Per
capita age profiles are estimates of per
capita values by single year of age.
► All consumption and labor production can
be assigned to individuals
► This assumes away pure public goods,
economies of scale, and other important
features of consumption and production.
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National Transfer Accounts
General Rule
► Estimate
the per capita age-profile for the
variable using household survey data or
administrative records.
► Use population data to construct a preliminary
aggregate age-profile.
► Adjust the aggregate profile and the per capita
profile to match a control total taken from
National Income and Product Accounts or some
other source.
► However, detailed estimation method could vary
across countries depending on available data.
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National Transfer Accounts
Private Consumption
► Standard
approach of allocating household
consumption among the members did not provide
reasonable results
 Engel method: food share is used to measure
households’ well-being
 Rothbarth method: welfare measured by expenditure on
adult goods per adult
► Alternative
method (NTA)
 Estimate education and health consumption directly
 Estimate private capital consumption (rental value of
owner occupied housing + flow of services from
durables)
 Allocate other consumption indirectly (using Equivalence
Scale)
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National Transfer Accounts
Allocating Private Education
Consumption
C
edu
j
  (a) E j (a)    (a) NE j (a)
• Private education consumption is regressed
on the number of enrolled (E) and nonenrolled (NE) in each age group.
• The age groups included will vary with the
country and its enrollment rates.
• Use unsmoothed profile.
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National Transfer Accounts
Allocating Private Health Care
Consumption
► Often
very complex in part due to various source
of financing, which includes
 Private out-of-pocket expense
 Private insurance
 Public sector
► Available
sources of data vary across countries.
► There are differences between NHA and NTA
 E.g. NHA document expenditures rather than
consumption. Thus it includes profits of insurance
companies.
► Estimate
using one of four approaches.
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National Transfer Accounts
Approach 1: Method based on
individual utilization measures from
expenditure survey data
C health
   (a) IN j (a)    (a)OUT j (a)
j
► Private
health consumption is regressed on
the number of members using inpatient
services (IN) and outpatient services (OUT)
in each age group.
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National Transfer Accounts
Approach 2: Based on age profile of per
capita utilization measures
C health

j
C health

j
  (a)U (a) M
  U (a) M
0
j
j
(a )
(a )   1aU (a ) M j (a )
   2 a 2U (a ) M j (a )
► Private
health consumption is regressed on the
number of members (M) and per capita utilization
measure by age (U)
► Could be linear (the former) or non-linear (the
latter)
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National Transfer Accounts
Approach 3: Based on non-parametric
iterative method
► Assign
health expenditure equally to each
household member and then tabulate the per
capita profile.
► The per capita profile is then used as weights to
allocate health expenditure to household members
producing a new per capita profile.
► Repeat until the weights do not change much.
► Unlike regression approach, it does not produce
negative coefficients for some age groups.
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National Transfer Accounts
Estimated C after iteration
Age
True C
1
2
3
4
5
6
5
10
14.44
11.90
10.83
10.36
10.16
10.07
35
30
25.00
27.42
28.74
29.40
29.72
29.87
65
20
22.22
21.54
20.85
20.43
20.21
20.10
HH No
Id No
Age
HH C
1
2
3
4
5
6
1
1
5
70
23.33
15.69
12.48
11.09
10.49
10.22
1
2
35
70
23.33
27.16
28.76
29.45
29.76
29.89
1
3
35
70
23.33
27.16
28.76
29.45
29.76
29.89
2
1
35
80
26.67
27.69
28.72
29.35
29.69
29.85
2
2
35
80
26.67
27.69
28.72
29.35
29.69
29.85
2
3
65
80
26.67
24.62
22.56
21.30
20.63
20.30
3
1
65
40
20
20.00
20.00
20.00
20.00
20.00
3
2
65
40
20
20.00
20.00
20.00
20.00
20.00
4
1
5
20
10
10.00
10.00
10.00
10.00
10.00
4
2
5
20
10
10.00
10.00
10.00
10.00
10.00
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National Transfer Accounts
Approach 4: Based on simple regression
C
health
j
   (a) M j (a)
► Private
health consumption is regressed on
the number of household members (M).
► Could have negative coefficients—replace
with zero.
► The least recommended approach.
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National Transfer Accounts
Estimating Other Household
Consumption
 (a)  1  0.6 (for a  4)
 (a)  1  [0.6*(20  a)]/16 (for 4<a<20)
 (a)  1 (otherwise, i.e., a  20)
► Assumed
to be proportional to an equivalence
scale that is equal to 1 for adults aged twenty
or older, declines linearly from age 20 to 0.4
at age 4, and is constant at 0.4 for those age
4 or younger.
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National Transfer Accounts
Public Consumption
►
►
Allocated based on administrative records, and in some
cases, survey data.
Public education consumption
 Formal education consumption: estimate by calculating unit cost
per student per level.
 Informal education consumption: estimate by dividing total public
informal education consumption by total population by age.
►
Public health care consumption
 Health care purchased by individuals and reimbursed through
public programs: captured in household surveys.
 Health care provided directly to individuals by government clinics:
allocate using administrative records.
 Collective health services: allocate on a per capita basis.
►
Other public consumption: equally to all members
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National Transfer Accounts
Normalized Consumption Ratio
(normalized by simple average of YL pc for age 30-49 of each economy)
2.5
Thailand 1996
Japan 2004
Indonesia 1996
2.0
Costa Rica 2004
Taiwan 1981
Taiwan 1986
Taiwan 1991
1.5
Taiwan 1998
Taiwan 2003
Korea 2000
1.0
Sweden 2003
China urban 2002
Uruguay 1994
0.5
US 2003
China rural 2002
France 2001
India 1999
0.0
0
10
20
30
40
50
60
70
80
90+
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National Transfer Accounts
Consumption Profiles: Industrialized
vs. Developing Countries.
1.200
More on
elderly
(health care)
C(a)/Yl(30-49)
1.000
US
More on
education
0.800
Japan
0.600
0.400
Range for developing
countries
0.200
0.000
0
10
20
30
40
50
60
70
80
90+
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National Transfer Accounts
Estimating Labor Income
Labor income includes
 The compensation of employees
. Wages and salaries
. Fringe benefits
. Deferred payments
 Labor’s estimated share of mixed income
(self-employment income)
► Does not include in-home activities which does
not produce market goods or services (e.g.
childrearing)
►
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National Transfer Accounts
Imputing Labor Income for Unpaid
Family Workers
► Estimate
using the age profile of earnings of
employees as a share to allocate household selfemployment income to self-employed workers
including unpaid family workers.
 Example: Two-third of this household’s selfemployment income equals 30. Then,
Age
Earnings per employee
Imputed
18 (unpaid)
200
10
44 (self emp.)
400
20
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National Transfer Accounts
Mexican Pesos
Per Capita Private Income, Mexico, 2004
YL Old
YL Imputed
unincorp_old
unincorp_imp
earnings
benefits
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
0
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+
Age
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National Transfer Accounts
Primary Target: Countries with Large Share of
Self-Employment Income (per capita)
20
National Transfer Accounts
Secondary Target: Countries with Moderate
Share of Self-Employment Income
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National Transfer Accounts
Age
84
77
70
63
56
49
42
35
28
21
14
7
1.4
1.2
1
0.8
0.6
0.4
0.2
0
0
Relative to mean labor
income of 30-49
Per Capita Labor Income Profile
Chile (1997)
Costa Rica (2004)
Finland (2004)
France (2001)
India (1999/2000)
Indonesia (1999)
Japan (2004)
Kenya (1994)
Mexico (2005)
Philippines (1999)
Slovenia (2004)
S.Korea (2000)
Sw eden (2003)
Taiw an (2003)
Thailand (2004)
Uruguay (1994)
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National Transfer Accounts
Labor Income: Industrialized vs.
Developing Countries.
1.4
Japan
Higher Yl in the
50-59 age group
1.2
1
Developing
0.8
US
0.6
0.4
0.2
0
0
10
20
30
40
50
60
70
80
90+
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National Transfer Accounts
Lifecycle Deficit and Surplus Ages
Country
Year
Early Age
Later Age
Duration
Indonesia
1996
29
58
29
Thailand
1996
26
61
35
Taiwan
1998
24
56
32
Japan
1999
29
61
32
United States
2000
27
59
32
Costa Rica
2004
24
57
33
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National Transfer Accounts
Aggregate Age-Profile
► Use
population data to construct a
preliminary aggregate age-profile.
 Population data are available from the UN Pop
Division for the period of 1950-2050 and also to
2300 (long term projection).
 Insure that population data have been adjusted
to eliminate age heaping and under-reporting.
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National Transfer Accounts
Aggregate Controls
► Adjust
the aggregate profile and the per capita
profile to match a control total taken from NIPA or
some other source.
 Private consumption: household final consumption
expenditure + non-profit institutions serving households’
(NPISHs) final consumption expenditure
 Public consumption: general government final
consumption expenditure
 Earnings + fringe benefits: compensation of employees.
NIPA excludes compensation received by non-resident
and remittances (on-going discussion)
 Labor portion of self-employment income: mixed income
of household sector
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National Transfer Accounts
Some Adjustments are Needed
► In
NIPA, prices are market prices; in NTA, prices
are basic prices net of indirect taxes (see Beet’s
presentation for details)
► In NIPA, private health consumption reimbursed
through public health insurance programs
(Medicare, NHI) are private health consumption; in
NTA it is reclassified as public consumption.
► In NIPA, non-housing consumer durable
consumption is measured by expenditure; in NTA,
consumption of it is the flow of services.
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National Transfer Accounts
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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National Transfer Accounts
The End
National Transfer Accounts
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