Consumption Allocation Estimation

Transcription

1 Consumption Allocation Estimation by Maliki NTA Workshop I Nihon University Population Research Institute October 2005

2 Table 1. National Transfers Flow Account Total Domestic by age Total Lifecycle Deficit 141, , ,408 36,460 (20,737) 1,801 10,959 Consumption 361, , ,263 84, ,396 36,525 15,207 Public 9,901 9,901 9, Private 351, , ,161 83, ,373 36,525 15,207 Less: Labor income (219,960) (219,960) (9,855) (47,999) (123,133) (34,724) (4,248) Foreign Reallocations Asset Reallocations Public Income on Assets Less: Public Saving Private Income on Assets Less: Private Saving Transfers Public (0) (0) 8,576 (2,189) (5,062) (1,242) (83) Private Intervivos 45,456 45, ,142 23,043 (72,616) (17,454) 2,340 Bequests

3 Consumption Allocation Presentation Outline Consumption Allocation by Sector

4 Objectives Estimate the cost of children Estimate the allocation of consumption to individuals in the household Comparison of several methods of estimation

5 Engel Method Food is a normal good and can be used as a means by which to measure welfare Compares the expenditures of two families: with child and without child, holding the level of welfare constant Equivalence scale Deaton (1986) employs the Engel method to estimate the equivalence scale of a child using Susenas 1978 data

6 Engel Method Food Share Large household w o f Small household x o x 1 Total Outlay

7 Working (1943), Leser (1963), and Deaton (1987) ; Engel Method w i = αi + βi ln x n + ηi ln J 1 ( ) n + j= 1 γ ij n j n + τ iz + ε i w i food share x expenditure n household size ; n j number of family members in age group j z control variables

8 Equivalence Scale Reference family w = + x + N + N + Z 0 o β0 β1ln( ) ( β2 β1)ln( ) γ j / j Family without k th -member k k k 0 β0 β1 β2 β1 γ j γ j w = + ln( x ) + ( )ln( N 1) + /( N 1) /( N 1) + Z

9 Equivalence Scale (cont.. ) 1) ( 1) ( 1 ln ) ( ln = N N N N N x x k j j k β γ β γ β β β Solving the equations, conditional on maintaining the same welfare level, yields: Note: 0 k x equivalence scale x =

10 Rothbarth Method Using adult goods as a measure for adult welfare Similar methodology

11 Rothbarth Method expenditure on adult goods w o f Small household Large household x o x 1 Outlay

12 Engel vs. Rothbarth Methods The Engel method assumes that food share is a means by which to measure the adult s well being The Rothbarth method assumes that adult goods expenditures can reflect the adult s well being Both estimation methods are problematic

13 F X w = a + bh G I K J ln + cf+ u ε i i i i i Ray s Method where ε = j f F j j f j equivalence scale of child of age group i F number of children F i X w i number of members of age group j total expenditures food share, housing, durable, goods and services

14 Previous Results Deaton (Susenas 1978) ROTHBARTH METHOD ENGEL METHOD < Tsaklogou (Europe) Bradbury (Australia) * (adult clothing) 1.21

15 Expenditures of household Food share Age Number of household members Data Required Other household characteristics for use as control variables

16 Method Age Group Child Cost* Notes Engel 114% 144% 152% Rothbarth <0 22% 64% Adult clothing Rothbarth <0 <0 38% Adult food Ray s 94% 96% 88% Food-share, housing, goods and services and durable goods * Reference adults: 30-34

17 Split Method Separate estimation on assignable goods Education Health Alternatives for allocating non-assignable goods: Engel Method A priori allocation (0.5 for children, 1 for adult or any other proportion, or other allocation rule)

18 Education Health Current consumption Private Consumption Without education, health, durable, and housing Asset consumption Durable consumption without housing Housing consumption

19 Equivalence Scale Formula (A priori) 20 a α( a) = (4 < a< 20) 0.6 ( a 4) 16 α(a) = equivalence scale of age group a

20 Other Current Consumption Sectors: Excluding housing and durable goods Equivalence Scale, Basic Allocation Model Age Source: Comfort Sumida

21 Estimation of Education Transfers e + = τ β N jx f fj f N fj e τ + jx β f number of enroll members in age group f in the household j sector x (education) expenditure of household j average expenditure of age group f

22 Predicting education expenditure for enrolled household member ˆ τ ˆ e ( ) β D = τ ˆ β fn fj f e+ e+ f fij ijx jx e N fj ˆe τ + ijx ˆβ f e D fij number of enroll members in age group f in the household sector x (education) expenditure of household member i average expenditure of age group f dummy variable indicating if member of household j is enrolled at school

23 Special Case: Taiwan Report on household education expenditure only limited to elementary to higher education Preschooler (private and expensive) are not allocated education consumption under previous methodology Part-time students are not reported as enrolled Previous methodology under estimate the allocation

24 Modified Methodology f = 50 f = 7 f = 5 e+ jx = f N fj + f NEfj + f Pfj f = 6 f = 6 f = 3 τ β α ϕ N fj NE fj number of enrolled members number of non-enrolled members P fj number of members whose age from 3 to 5

25 Estimation of Health Transfer Estimate average health expenditure by age: τ β N e e jx f fj f + = e N fj e τ + jx β f number of household members in age group f sector x (health) expenditures of household j average expenditure for age group f

26 Health Expenditure (cont.. ) Predicted health expenses for each member ˆ τ ˆ ( ) β = τ ˆ β f N fj f e+ e+ f ijx jx e e N fj e τ + ijx β f number of household members in age group f health (sector x) expenditures of household member i average expenditure for age group f

27 Illustrations Members Age School Beta Total Education Share Individual Education Σ Beta*School 135

28 Health Expenditures - Taiwan ( ) Age Relative to Maximum

29 Education Transfers - Indonesia ( ) Relative to Maximum

30 Consumption Allocation Indonesia - Susenas split+engel engel

31 Split Method Susenas 1996 Monthly Expenditures per capita allocation linear allocation Age

32 Consumption less Education and Health Taiwan (Mean by Age) (76-79) Linear Equivalence Scale s 1977s 1978s 1979s Age

33 What`s next?

34 Adjust to National Level 1. Estimate the age profile C = βc N f f f 2. Multiply by the Population Adjust to NIPA total β = C C N private private NIPA f f f

35 4,000 3,500 3,000 2,500 2,000 1,500 1, Total Consumption (Adjusted) Indonesia 1996 Billion Rupiah (Year)

36 Total Consumption (Adjusted) Taiwan Billion TW (year)