Public Expenditures in NTAs in Comparative Context Introductory remarks by Jorge Bravo 4 th Annual National Transfer Accounts Workshop Berkeley, 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 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

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)

Cases of relatively low public consumption: India, Philippines, Thailand

Cases of high public consumption: China, but also important in the U.S. and Japan

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)

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