Statistical Issues in Measuring Poverty from Non-Survey Sources NATIONAL ACCOUNTS

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Statistical Issues in Measuring Poverty from
Non-Survey SourcesNATIONAL ACCOUNTS
UN STATISTICS DIVISION Economic Statistics
Branch National Accounts Section
UNSD/NA/MR
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Is poverty under or over estimated?

• Two sources of aggregate welfare data
• National accounts (NA)
• Per capita Household final consumption
  expenditure (HFCE)
• Per capita Disposable income of households
• Household surveys (HS)
• Survey mean of consumption
• Survey mean of income
• Is survey mean typically lower than per capita
  HFCE?

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Income versus expenditure in the poverty concept

• Consumption surveys are far better than income
  surveys for poverty measurement
• Households more willing to reveal their
  consumption rather than their income
• Conceptualization of non-wage incomes
• Recall periods

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Some conceptual and measurement issues in
National Accounts

• Disposable income
• Household final consumption
• Two concepts
• Household final consumption expenditure
• Actual final consumption of households

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Comparability between NA and HS estimate of
disposable income

• Recording of income of self employed persons
• Imputed rent of owner occupied dwellings
• Exhaustiveness adjustments
• Compilation of disposable income in NA (Table
  1.doc)

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Components of disposable income Contents covered in national accounts Estimation method
Compensation of employees Includes wages and salaries, payments in kind and employers social contributions to pension funds and other insurance schemes Should be surveyed
Operating surplus Incomes received by households from using their own dwellings Should be surveyed in association with the estimation of the imputed rental value of owner occupied dwellings
Mixed income Income left for own use to owners of household enterprises without business accounts after deducting from output intermediate cost of goods and services as well as depreciation and taxes on production Should be surveyed in association with survey on household production
Property income receivable Interest, land rent, dividends received and property income attributable to insurance policy holders imputed as received from pension funds Should be surveyed. Interest received should be adjusted to include financial service charges paid that had been already deducted from interest received. Property income attributable to insurance holders must be imputed on the basis of insurance held.
Withdrawals of income from quasi-corporations Withdrawals of income for own use by owners of unincorporated enterprises but with full set of business accounts such as partnership Should be surveyed
Social benefits other than social transfer in kind Social security benefits in cash, private funded social benefits (pension benefits), unfunded social benefits by employers and social assistance benefits in cash Should be surveyed and or use of pension funds data
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Other current transfers in cash receivable Net non-life insurance claims, current transfers from government, current transfers from relatives and others Should be surveyed and adjusted to exclude insurance service charges
Social transfers in kind Individual final consumption of government and NPISHs1 Imputed by analyzing government and NPISHs expenditure with regards to types of households that benefit
- Social contributions Contributions to social security fund, pension funds and other insurance schemes Should be surveyed and compared with sources of data like government, pension funds and insurance companies
- Property income payable Interest and land rent paid Should be surveyed and compared with data from financial corporations and adjusted to exclude financial service charges, which are treated in the NA as final consumption.
- Taxes on income Regular income, property and wealth taxes Should be surveyed and compared with data from government
- Current transfers payable Net non-life insurance premiums paid and current transfers from relatives and others Should be surveyed and compared with data from insurance companies and adjusted to exclude insurance service charges
Disposable income (adjusted)

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Comparability between NA and HS estimate of
household consumption

• HS provides information on household consumption
  at the lowest detailed level
• but
• HS can not be directly used for NA estimates
• Conceptual adjustments
• Empirical adjustments

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Conceptual adjustments

• Differences in definitions and concepts
• Households production for own final consumption
• Services of owner occupied dwellings
• Income in kind
• Financial intermediation services indirectly
  measured
• Insurance and pension fund services
• Direct sales and purchases for business purposes
• National concept
• Diagram 1 (Diagram 1.doc)

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Households expenditures based on Household budget survey Households expenditures based on Household budget survey Households expenditures based on Household budget survey Households expenditures based on Household budget survey Households expenditures based on Household budget survey Households expenditures based on Household budget survey Households expenditures based on Household budget survey Households expenditures based on Household budget survey
       
Adjustments for purchases of residents abroad and non-residents on the domestic territory - national concept Adjustments for purchases of residents abroad and non-residents on the domestic territory - national concept Household production for own final consumption Household production for own final consumption Household production for own final consumption Adjustments for direct sales and purchases for business purposes Adjustments for direct sales and purchases for business purposes Adjustments for direct sales and purchases for business purposes
       
  Services of owner occupied dwellings imputed rentals Services of owner occupied dwellings imputed rentals Services of owner occupied dwellings imputed rentals  
       
  Goods and services provided by employers - income in kind Goods and services provided by employers - income in kind Goods and services provided by employers - income in kind  
     
  Other services -FISIM - Insurance and pension fund services Other services -FISIM - Insurance and pension fund services Other services -FISIM - Insurance and pension fund services  
   
Household final consumption expenditure - national National accounts Household final consumption expenditure - national National accounts Household final consumption expenditure - national National accounts Household final consumption expenditure - national National accounts Household final consumption expenditure - national National accounts Household final consumption expenditure - national National accounts Household final consumption expenditure - national National accounts Household final consumption expenditure - national National accounts
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Empirical adjustments

• Differential non-response
• High income households
• Exhaustiveness
• Data confrontation
• Retail trade
• Enterprise surveys
• Others
• Diagram 2 (Diagram 2.doc)

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Households final consumption expenditure based on National accounts Households final consumption expenditure based on National accounts Households final consumption expenditure based on National accounts Households final consumption expenditure based on National accounts Households final consumption expenditure based on National accounts Households final consumption expenditure based on National accounts
             
Adjustments for differences in population - institutional households Adjustments for differences in population - institutional households Adjustments for differences in population - institutional households Adjustments for differences in population - institutional households Adjustments for data confrontation Adjustments for data confrontation Exhaustiveness adjustments for differential non-response Exhaustiveness adjustments for differential non-response Exhaustiveness adjustments for differential non-response Exhaustiveness adjustments for differential non-response
   
Retail trade data Retail trade data Surveys of enterprises Surveys of enterprises Others - Foreign trade data - Administrative data Others - Foreign trade data - Administrative data  
         
  Adjustments for purchases for business purposes Adjustments for purchases for business purposes      
  Adjustments for purchases for business purposes Adjustments for purchases for business purposes      
     
Household final consumption expenditure National accounts estimate Household final consumption expenditure National accounts estimate Household final consumption expenditure National accounts estimate Household final consumption expenditure National accounts estimate Household final consumption expenditure National accounts estimate Household final consumption expenditure National accounts estimate  
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Actual final consumption of households

• Shows who benefits from the consumption
• Main objective is to enhance comparability of
  households final consumption across countries and
  over different time periods
• Consists of
• Final consumption expenditure of households
• Social transfers in kind from the Government
• Social transfers in kind from NPISHs

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Relationships between the two concepts

  Sector making expenditure Sector making expenditure Sector making expenditure Sector making expenditure Sector making expenditure Sector making expenditure Sector making expenditure Actual final consumption Actual final consumption
  General Government General Government NPISHs NPISHs Households Households Households Actual final consumption Actual final consumption
Individual consumption X X X X X X X Households actual individual final consumption Households actual individual final consumption
  ( Social transfers in kind) ( Social transfers in kind) ( Social transfers in kind) ( Social transfers in kind)       Households actual individual final consumption Households actual individual final consumption
Collective consumption X X 0 0 0 0 0 Government actual collective final consumption Government actual collective final consumption
  X X 0 0 0 0 0 Government actual collective final consumption Government actual collective final consumption
Total final consumption Government final consumption expenditure Government final consumption expenditure NPISHs final consumption expenditure NPISHs final consumption expenditure Households final consumption expenditure Households final consumption expenditure Households final consumption expenditure Actual final consumption Total final consumption expenditure Actual final consumption Total final consumption expenditure
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International debate on non-compliance between NA
and HS survey means

• Why use national accounts data (Karshenas)?
• There is significant relationship between the two
  measures but it is not always the case that
  national accounts consumption would be lower than
  survey-based mean consumption
• National accounts-based estimates appear to be
  more plausible in relation to other non-monetary
  indicators of poverty
• Calibration of survey means by using external NA
  based information as a scale factor for a removal
  of discrepancy

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International debate on non-compliance between NA
and HS survey means (cont.)

• Why prefer household survey data (Deaton)?
• Designed to directly measure individual welfare
• Yes, under-reporting/non-compliance problems, but
  probably produce more accurate measure of living
  standard of the poor
• No sound basis for using mean from NA and
  distribution from household survey for
  calibration to remove differences.

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Conclusions

• Discrepancy between NA and HS means has important
  implications for the analysis of poverty
• NA data even not used for direct estimation of
  poverty might be of particular help in case of
• Outdated HS data
• Missing HS
• Practice of HS needs to be improved and
  harmonized

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• Thank You