Public Expenditures in NTAs in Comparative Context
Introductory remarks by Jorge Bravo4th Annual National Transfer Accounts
WorkshopBerkeley, California, 19 and 20 January, 2007
Public Expenditures in NTAs in Comparative Context
1. Public expenditures: international differences
2. Patterns and weight of Public Transfers in the NTA system
3. Some methodological issues
Public expenditures: international differences
Government expenditures show substantial international variability according to the type of economic system, and wealth and degree of development; they tend to be larger in the more developed countries.
Reminder of the Concept of Expenditures, Transfers in the NTA framework
• Perspective from the individual government expenditures are public transfer inflows (taxes are outflows)
• “Public Transfers” comprise cash and in-kind transfers. Cash transfers constitute disposable income, and are one means of financing private consumption. In-kind transfers constitute public consumption
Patterns and weight of Public Transfers in the NTAs
a) Fairly systematic and distinct broad age patterns
b) Government in-kind transfers account for a substantial proportion of total consumption
c) Examination of total transfers = in-kind + cash transfers shows that very large portions of the consumption of individuals is arbitrated by the public sector
Patterns and weight of Public Transfers in the NTAs
a) Public consumption age patterns are very distinct (U-shaped). They almost mirror-image those of private consumption (inverted U-shaped)
b) Government in-kind transfers account for a very important portion of total consumption, even in free-market economies
Public vis-à-vis Private Consumption
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+
Age
Per
Ave
rag
e L
abo
r In
com
e A
ges
30-
49
Taiw an, CF
Thailand, CF
US, CF
Japan, CF
Indonesia, CF
Costa Rica, CF
Austria, CF
Brazil, CF
Chile, CF
China, CF
France, CF
India, CF
Philippines, CF
S.Korea, CF
Slovenia, CF
Sw eden, CF
Uruguay, CF
New member, CF
Taiw an, CG
Thailand, CG
US, CG
Japan, CG
Indonesia, CG
Costa Rica, CG
Austria, CG
Brazil, CG
Chile, CG
Source: NTA website as of Jan/07
U.S.
U.S.
Thailand
Thailand
Public transfers by sector/type
• Very similar overall age shapes across countries (with few minor differences),
• but with extremely different levels in education and health public transfers
Public In-kind transfers in Education
0.00
0.05
0.10
0.15
0.20
0.25
0.30
Age
pe
r m
ea
n Y
L 3
0-4
9
Taiw an, CGE
Thailand, CGE
US, CGE
Japan, CGE
Indonesia, CGE
Costa Rica, CGE
Austria, CGE
Brazil, CGE
Chile, CGE
China, CGE
France, CGE
India, CGE
Philippines, CGE
S.Korea, CGE
Slovenia, CGE
Sw eden, CGE
Uruguay, CGE
New member, CGESource: NTA website as of Jan/07
Indonesia
Japan
U.S.
Thailand, Chile, Costa Rica, Taiw an
Public In-kind transfers in Health
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90
Age
pe
r m
ea
n Y
L 3
0-4
9
Taiw an, CGH
Thailand, CGH
US, CGH
Japan, CGH
Indonesia, CGH
Costa Rica, CGH
Austria, CGH
Brazil, CGH
Chile, CGH
China, CGH
France, CGH
India, CGH
Philippines, CGH
S.Korea, CGH
Slovenia, CGH
Sw eden, CGH
Uruguay, CGH
New member, CGHSource: NTA website as of Jan/07
Indonesia
Japan
U.S.
Costa Rica
Thailand
Public In-kind transfers in Other
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.10
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90
Age
pe
r m
ea
n Y
L 3
0-4
9
Taiw an, CGX
Thailand, CGX
US, CGX
Japan, CGX
Indonesia, CGX
Costa Rica, CGX
Austria, CGX
Brazil, CGX
Chile, CGX
China, CGX
France, CGX
India, CGX
Philippines, CGX
S.Korea, CGX
Slovenia, CGX
Sw eden, CGX
Uruguay, CGX
New member, CGX
Indonesia
Japan & U.S.
Costa Rica
Thailand
Source: NTA website as of Jan/07
Chile
Taiwan
Patterns and weight of Public Transfers in the NTA system
a) Public consumption age patterns are very distinct (U-shaped), they almost mirror-image those of private consumption (inverted U-shaped)
b) Government in-kind transfers account for a substantial portion (1/10 to more than 1/3) of total consumption, in different types of economies (from China to India, Japan, the U.S., Chile)
Monthly Per Capita Production and Consumption, 1999/2000, India
0
500
1000
1500
2000
2500
1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97
Total Consumption Labor Income Private Consumption
Cases of relatively low public consumption: India, Philippines, Thailand
Cases of high public consumption: China, but also important in the U.S. and Japan
Monthly Per Capita Production and Consumption, Rural China
0
1000
2000
3000
4000
5000
6000
1 5 9 1317212529333741454953576165697377818589
total c public c Labor income
Share of In-kind public transfers in total Consumption
0%
10%
20%
30%
40%
50%
60%
70%
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90
Age
pe
rce
nt
Taiw an
Thailand
US, CF
Japan
Indonesia
Costa Rica
Austria
Brazil
Chile
China
France
India
Philippines
S.Korea
Slovenia
Sw eden
Uruguay
Newmember, CF
Source: NTA w ebsite data as of Jan/07
Taiw an
U.S.
Indonesia
Costa Rica
Patterns and weight of Public Transfers in the NTA system
c) Total public transfers (adding on those in cash) provide an indication of the overall weight of the government as a mediator of the transfers. The data show very large portions of the consumption of individuals being arbitrated by the public sector, especially in some ages (e.g., slightly under 30% of the consumption of the elderly in the U.S., about 50% in Chile, slightly less than 60% in Japan).
Source: Ogawa et al. (2006)Source: Ogawa et al. (2006)
CHILE 1997: Finance of Consumption, by main group ages
25%
-19%
49%
97%
39%74%
22%
12%
1%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
0-14 15-64 65+
Age
Other
Work
Public Transfers
Some methodological issues regarding Public Transfers
a) Definition : In policy/fiscal usage, public transfers usually refer to selected social programs (education, health, social security), and often only to those provided in cash.
Whereas in NTAs, public transfers = general government budget
Methodological issues
b) Measurement. We estimate in-kind transfers by considering the total cost incurred by government in producing/providing a given service. To be consistent with the notion that cash transfer=disposable income, when calculating cash transfers we need to separate that part of the cost that is received in cash by beneficiaries from the administrative/operational costs of running the program and providing the transfer.
Methodological issues
c) Analysis of the distributional effects of transfers. Traditionally and most commonly, poverty and inequality are assessed on the basis of household income. Typically, the distributive effect of government policies is assessed by adding public cash transfers to the HH “autonomous income”
Methodological issues
c) Analysis. NTAs provide a new means of evaluating the distributional impact of public (and private) transfers, characterized by:
- Using total individual consumption as the basis to assess poverty and inequality
- Considering explicitly the incidence of cash and in-kind transfers, taxes, and of the net public transfers
- Doing all of the above by age and for different cohorts true life-cycle assessment