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Construc)onofIncomeConcepts
andComponents
SeanHigginsTulaneUniversity
LearningEventonthe
CommitmenttoEquityMethodology
CommitmenttoEquityIns8tute,TulaneUniversity,
andtheWorldBankWashington,D.C.–February1-3,2016
2
IncomeConceptsMarketIncome
MarketIncomeplusPensions
GrossIncome
DisposableIncome
TaxableIncome
FinalIncome
ConsumableIncome
DirectTransfers
-
Non-TaxableIncome
ContributoryPensions
+
NetMarketIncome
+DirectTaxes
DirectTransfers
+DirectTaxes
-
-
+IndirectSubsidies
- IndirectTaxes
+In-KindTransfers(Educa8on,Health)
- Copayments,UserFees
3
• ConsumableIncome=DisposableIncome+Indirectsubsidies–Indirecttaxes𝑐=𝑑+ 𝐵↓𝑖 − 𝑇↓𝑖
ConsumableIncome
4
IncomeConceptsMarketIncome
MarketIncomeplusPensions
GrossIncome
DisposableIncome
TaxableIncome
FinalIncome
ConsumableIncome
DirectTransfers
-
Non-TaxableIncome
ContributoryPensions
+
NetMarketIncome
+DirectTaxes
DirectTransfers
+DirectTaxes
-
-
+IndirectSubsidies
- IndirectTaxes
+In-KindTransfers(Educa8on,Health)
- Copayments,UserFees
5
• Valuedatgovernmentcostforeachlevel– Includerecurringandinvestmentspending– Includeadministra8vecosts– Possiblelevels:
§ Daycare§ Preschool§ Primary§ Secondary§ Ter8ary
• Disaggregatebygeographicareaifpossible
Education
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• Imputa8onmethod– CombinedatainsurveyonwhoaXendspublicschoolateachlevelwithna8onalaccountsdataonspending
Ifthesurveydoesn'tspecificallyhaveaques8onaboutwhetherthechildaXendspublicvs.privateschool:• Inference+Imputa8on
– e.g.,SriLanka– Useques8onfromconsump8onmoduleonwhetherhouseholdpaidfacilityfeestogovernmentschoolsorschoolfeestoprivateschoolstoinferwhetherchildaXendspublic
• AlternateSurvey+Predic8on+Imputa8on– Seenextslide
Education
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• AlternateSurvey+Predic8on+Imputa8on– e.g.,UnitedStates– MainsurveyaskswhetherthechildaXendsschool,butnotpublicvs.private
– Findalternatesurveythathasincomedataandpublicvs.privateschoolaXendance
– ForsampleofchildrenaXendingschool,predictprobabilityofaXendingpublicschoolusingcovariatescommontobothsurveysasindependentvariables(probitinalternatesurvey)
– Usecoefficientstopredictprobabilityinmainsurvey– Mul8plyprobabilitybyaveragespendingperstudentbylevel
§ Expectedvalueofbenefitreceived
Education
8
• Twomainsystems:publicfacili8esorpublicinsurance• Publicfacili8es
– Dividetotalspendinginna8onalaccountsbynumberofvisitsinsurveydatatoobtainspendingpervisit
– Disaggregatebytypeofcareasmuchaspossible§ Primaryandin-pa8entcareinArmenia,Indonesia§ Basichealthfacilityvs.hospitalinPeru§ ThreelevelsofchildbirthcareinBolivia
• Publicinsurance– Dividetotalspendinginna8onalaccountsbynumberofcoveredindividualstoobtainspendingperinsured
– Disaggregatebyageifpossible§ Spendingonpublichealthinsurancevariesgreatlybyage
– Disaggregatebytypeofpublichealthinsuranceifapplicable• Somecountries:combina8onofbothsystems• Disaggregatebygeographicareaifpossible
– e.g.Brazil:averagespendingforeachcaretype-statecell
Health
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• Imputa8onmethod– Combinesdatafromna8onalaccountsonamountspentonpublichealthfacili8es;publichealthinsurancewithsurveydataonwhobenefits
• AlternateSurvey+Imputa8on– Findsurveywithincomedataanduseofpublichealthfacili8esorpublicinsurancecoverage
– e.g.,Guatemala,SouthAfrica• Predic8on(shouldn'tbenecessary)
– Ifna8onalaccountsspendingonpublichealthfacili8esorpublichealthservicesisnotavailable(veryrare)
– Predictcostofdifferentservicesusingspendingonsimilarservicesatprivatefacili8esinconsump8onmodule
• SecondarySource(shouldn'tbenecessary)– Onlyifnoinforma8ononuseofhealthservicesorinsurancecoverageinmainoralternatesurvey
– e.g.,Chile,Mexico
Health
10
IncomeConceptsMarketIncome
MarketIncomeplusPensions
GrossIncome
DisposableIncome
TaxableIncome
FinalIncome
ConsumableIncome
DirectTransfers
-
Non-TaxableIncome
ContributoryPensions
+
NetMarketIncome
+DirectTaxes
DirectTransfers
+DirectTaxes
-
-
+IndirectSubsidies
- IndirectTaxes
+In-KindTransfers(Educa8on,Health)
- Copayments,UserFees
11
• Usuallydirectlyiden8fiedinsurveyifcommonincountry• Theseuserfeescanalsobeusedtomoreaccurately
approximateeduca8onorhealthbenefits• Uselocalknowledgetodeterminemostplausible
scenario(seeWagstaff,2012):– Userfeeisindependentofbenefit(useimputa8onmethoddescribedbeforetocalculatebenefits)§ e.g.,healthinIndonesia
– Subsidizedpor8onofhealthcareisconstant;userfeeistotalcostminusfixedsubsidy
– Userfeeispropor8onoftotalcostofcare§ e.g.,healthinJordan
User Fees
12
IncomeConceptsMarketIncome
MarketIncomeplusPensions
GrossIncome
DisposableIncome
TaxableIncome
FinalIncome
ConsumableIncome
DirectTransfers
-
Non-TaxableIncome
ContributoryPensions
+
NetMarketIncome
+DirectTaxes
DirectTransfers
+DirectTaxes
-
-
+IndirectSubsidies
- IndirectTaxes
+In-KindTransfers(Educa8on,Health)
- Copayments,UserFees
13
• FinalIncome=ConsumableIncome+Educa8onandHealthBenefits–Co-paymentsandUserFees𝑓=𝑐+ 𝐵↓𝑘 −𝐹
Final Income
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• Forallincomecomponentsimputedusingamountsfromna8onalaccounts
• Scaledownbenefitstoavoidoveres8ma8ngeffectofthatcomponent
• Example:primaryeduca8onbenefits– Divideprimaryspendinginna8onalaccountsbydisposableincomeinna8onalaccountstoobtainthera8oR
– Scaledownprimaryeduca8onbenefitsinthesurveyun8lthera8oofprimaryeduca8onbenefitsinthesurveytodisposableincomeinsurveyalsoequalsR
Scaling Down
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Comparing Brazil and US Higgins, Lustig, Ruble, and Smeeding (2015)
16
Comparing Brazil and US Higgins, Lustig, Ruble, and Smeeding (2015)
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• Evenifpovertydecreases– Poorcanbemadepoorer– Ornon-poormadepoor
Fiscal Impoverishment Higgins and Lustig (2015)
18
• InBrazil($2.50PPPperdaypovertyline)– Inequalityisreduced– Povertyisreduced– Butone-thirdofthe(consumableincome)pooraremadepoorer(ornon-poormadepoor)bytaxesandtransfers
• Thereisfiscalimpoverishmentif
• Therearefiscalgainstothepoorif
Fiscal Impoverishment Higgins and Lustig (2015)
19
Problems with Conventional Measures Higgins and Lustig (2015)
20 20
Axiomatic Measure Higgins and Lustig (2015)
21 21
Conventional Measures in Brazil Higgins and Lustig (2015)
22
• Atthe$2.50perpersonperdaypovertyline:– 34.9%oftheconsumableincomepoorarefiscallyimpoverished
– Totalfiscalimpoverishmentofover$676million,or10%ofbudgetofBolsaFamília
– Fiscalimpoverishmentperimpoverishedpersonisabout8%oftheirincome
– Notallfiscallyimpoverishedareexcludedfromsafetynet:forexample,65%receiveBolsaFamilia
22
Fiscal Impoverishment in Brazil Higgins and Lustig (2015)
23 23
Decomposing the Poverty Gap Higgins and Lustig (2015)
