Official Income Research Articles

Response to Edward O'Boyle Article

Edward O'Boyle provides an interesting and useful discussion of the concept of arguing that or unmet physical need, has two dimensions: an individual/physical and a dimension. The individual of should be measured by an absolute standard or living The should be measured by a or income distribution standard. O'Boyle speaks favorably of a measurement system used Ireland which combines both dimensions. The minimal living standard is measured by deprivation indicators such as whether the household lacks a telephone, central heating, a refrigerator, etc. The or income distribution is determined by whether the household has income below a certain percentage of the national average. A household is deemed to be in poverty if it is judged to be deprived under both dimensions. I would strongly concur with O'Boyle commending this system's use of physical deprivation indicators to measure whether a household meets a minimal living standard. My own research has pursued this approach for several years. While there will be more than ample room to argue about exactly what deprivations should be included and which deprivations should constitute the threshold of poverty, such discussions are likely to be highly informative regarding the actual living conditions of the a way that abstract discussions about income seldom are. (For reasons I shall discuss below, I am less sanguine about melding the measure of material deprivations with income distribution or relative standards.) O'Boyle then proposes his own two-dimension definition of for use the US This system is based on reported income rather than material deprivation. Under the proposed complex system, degree of is determined based on whether household income is: a) below the official income thresholds; and b) is the bottom decile or two deciles of the national income distribution. I would put forward the following objections to this specific approach. 1 The system uses income data from the Current Population Survey (CPS); I have argued the CPS is corrupt and that any measurement system using it is inherently misleading. 2 The official income thresholds are a criterion for measuring whether a family fails to meet a living standard; as my own paper shows, many families with reported incomes below these thresholds experience no actual material deprivation. 3 The unusual use of decile data to measure relative raises problems. By definition, exactly 20 percent of households always must have incomes the bottom two income deciles. This is true irrespective of the distribution of income the society. To deem any household as poor (or marginally poor) which has an income placing it the bottom two deciles of income distribution makes ineradicable even under the most dramatic schemes of income redistribution. This problem is somewhat mitigated, if we understand that O'Boyle deliberately seeks to measure the social dimension of deprivation simply by a family's rank position within the national hierarchy of household incomes. However, while a family's rank within the income hierarchy may prove an interesting concept, it still remains unclear why this should be termed poverty. 4 The use of income decile data to measure relative or deprivation is also problematic because income decile data is not adjusted for family size. Thus the use of raw decile data as a component of criteria, ceteris paribus, tends to inflate the number of small one or two person households which are considered or marginally poor. My own research suggests that these smaller households are not likely to be good candidates to be deemed either absolutely or relatively deprived. Within the context of O'Boyle's overall design, it probably might be better to determine if a family is ranked the bottom decile or quintile of incomes of families of a similar size. …

The social wage and the Accord in Australia

This paper provides an appraisal of the Social Wage aspects of the wages and incomes policies pursued in Australia between 1983 and 1996, when wage fixing arrangements were known as the Accord, being descriptive of consensus between Government, Labor and Business. The Accord is shown to have been effective in redistributing income between households, but not to the household sector. These conclusions are contradicted by National Accounts showing strong real growth over the Accord period. Official income measures are analysed to validate the appraisal. The appraisal is timely given current Maastricht discussions on social implications of wages and incomes policies.

Informal payments for health care in the Former Soviet Union: some evidence from Kazakstan.

An important feature of the health care system of the Former Soviet Union (FSU) and Central and Eastern Europe is the presence of informal or under-the-table payments. It is generally accepted that these represent a significant contribution to the income of medical staff. Discussions with medical practitioners suggest that for certain specialities in certain hospitals a doctor might obtain many times his official income. Yet little empirical work has been done in this area. Informal payments can be divided into those paid to health care providers and those that go directly to practitioners. They can be further divided into monetary and non-monetary. The complexity of these payments make obtaining estimates using quantitative survey techniques difficult. Estimates on contributions to the costs of medicines in Kazakstan suggest that they may add 30% to national health care expenditure. Payments to staff are likely to add substantially to this figure, although few reliable statistics exist. Research in this area is important since informal payment is likely to impact on equity in access to medical care and the efficiency of provision. The impact of attempts to reform systems using Western ideas could be reduced unless account is taken of the effect and size of the informal payment system.

Pareto efficient income taxation under costly monitoring

This paper studies the problem of Pareto efficient fiscal policies when labour supply is elastic and the government has no a priori information on income earned. The model is a two-class economy with an official and an unofficial labour market. Official income is taxed non-linearly, while unofficial income is only observable after a costly audit upon which it is taxed at an exogenous penalty rate. After characterisation of the Pareto efficient audit and tax policies, it is verified how these policies react to a higher government revenue requirement, an increase in the penalty rate, a stronger ambition to redistribute. In the two last scenarios, the effect on the marginal tax and the audit rate is shown to decompose into a government revenue effect and a substitution effect. A numerical example shows that the substitution effects are of minor importance, suggesting that first intuition about the best way for a government to cope with increased evasion opportunities— substituting auditing effort for high marginal tax rates—sketches only part of the picture.

A dominance evaluation of Taiwan's official income distribution statistics, 1976–1992

Statistical tests for Lorenz dominance and related tests for first order dominance are applied to Taiwan's official income distribution statistics for the period 1976–1992. Inference tests for Lorenz dominance reveal whether significant changes in income inequality have occurred, while first order dominance comparisons show the effects of growth on economic well-being across time. Several conclusions emerge from the study: (1) correcting for sampling errors and considering entire income distributions leads to insights into changes in Taiwan's income distribution that are not revealed by descriptive summary statistics that are relied upon in official reports; (2) Lorenz dominance analysis reveals that, on the whole, income inequality in Taiwan has become significantly more unequal across time; (3) the so called U-shaped inequality experience is not confirmed for the 1976–1992 study period; (4) first order dominance analysis reveals highly significant improvements in the standard living in most year-to-year comparisons; and (5) whether overall social welfare has improved since 1976 depends upon the specific welfare criterion applied and the time period considered.

Economic decline and the growth of the informal sector: The Guyana and Jamaica experience

AbstractThis paper employs the currency ratio model to estimate the size of the informal sector in Guyana and Jamaica from 1977 to 1989. It is shown that the official estimate of income for both countries, by excluding the informal sector, significantly understates true income levels. Fluctuations in the level of income generated by the informal sector mirrored fluctuations in estimates of official income for Guyana, but moved in a countercyclical fashion to official estimates for Jamaica. It is concluded that the growth of the sector did little to protect the poor in both countries from overall economic decline.

GNP and military mobilization

The remarkable shift from a limping United States recovery from the Great Depression of the 1930's to the relatively rapid and immensely successful World War II mobilization of the 1940's was far from an easy and orderly transition. The first official national income estimates in the United States were prepared in 1933 and were valuable in monitoring the recovery programs. They were especially helpful in determining the maximum potential resources for the wartime mobilization. This information was essential in setting goals that were both ambitious and feasible. Many difficulties were encountered in a feasibility dispute between civilian and military organizations and leaders. Changes in personnel, reorganizations and top level coordination led to massive production of armaments and truly making the United States the “Arsenal for Democracy.”

An Evaluation of the New Official Low Income Statistics

Official statistics on those at low incomes have recently been at the centre of heated debate about trends in poverty in Britain. The Government has argued, on the basis of recently published figures, that the position of those on low incomes has improved substantially in real terms and that they have experienced above-average income increases. Poverty lobbying groups, on the other hand, have used these statistics to argue that the poor are falling further behind, and that one-third of the population are in or on the margins of poverty.

The Luxembourg Income Study: The Use of International Telecommunications in Comparative Social Research

A computerized telecommunications network, the BITNET-EARN-NETNORTH system, has made it possible for some 588 universities worldwide to efficiently access large-scale statistical data sets stored at one central facility. There are practical and traditional difficulties in comparative international research projects, and the Luxembourg Income Study (LIS) seeks to overcome them. The advantages and disadvantages of housing a statistical data base such as LIS in one place are outlined. Advantages such as building an expert staff who thoroughly understand the data base and securing the privacy and confidentiality guarantees required before nations will grant access to official income statistics are contrasted with the disadvantages of time, cost, and user distance from the data base. The BITNET-EARN-NETNORTH system plus the LIS user package reconciles costs and benefits and allows access by researchers at any BITNET-EARN-NETNORTH site. The challenge for realizing the social research potential of centralized data sets and scholarly colleagueship now lies in creating payment mechanisms and funding consortia based upon principles that can facilitate international research collaboration.

In Memoriam: Simon Kuznets, 1901-1985

Kuznets, president of American Statistical Association (ASA) in 1949 and a winner of Nobel Prize in Economic Science in 1971, died on July 9, 1985. As Paul Samuelson, first American Nobel laureate in economics has said of second American to be awarded this Nobel Prize, Simon Kuznets was a giant in 20th century economics. He was founder of national income measurement, and he created quantitative economic history. Kuznets was born in czarist Russia in 1901. He attended University in Kharkov for a two-year period and then worked for two years in Division of Statistics of Central Soviet of Trade Unions. While employed by Division of Statistics, he published his first article, Money Wages of Factory Employees in Kharkov in 1920. Kuznets, together with his older brother, Solomon, migrated to United States in 1921, as he put it, because of the usual economic problems. The two brothers gained entrance to Columbia College with advanced standing, and was awarded a B.S. degree in 1923, an M.S. degree in 1924, and a Ph.D. in economics in 1926. His doctoral dissertation, Cyclical Fluctuations: Retail and Wholesale Trade, United States, 1919-1925, was written under supervision of Wesley C. Mitchell, who invited Kuznets to join National Bureau of Economic Research (NBER). Kuznets gained fame for research that he carried out at NBER, particularly in area of national income and product. He maintained his connection with NBER for more than 30 years. Kuznets was one of pioneers in criticizing state of disarray in collection of macroeconomic statistics, and he made a tremendous contribution to early improvement of U.S. governmental data. He felt that amount and types of data that were available during Depression of 1930s constituted a national scandal. The NBER had made some early estimates of national income that were discontinued in mid-1920s. The federal government made a one-time effort to produce national income estimates in 1923 with no subsequent follow-up. At NBER, Kuznets was given responsibility for research on national income and product accounts. After U.S. Senate decided that official income estimates should be undertaken, Kuznets was retained by Bureau of Foreign and Domestic Commerce to plan and supervise study. He went to Washington, D.C., took charge of work, and was responsible for publication in 1934 of country's first national income estimates for 1929-1932. These figures were published as an official Senate document, revealing among other things that national income had dropped from $89 billion in 1929 to $49 billion in 1932.

The Inequality of Household Incomes in Australia*

This paper presents income inequality statistics for Australia calculated from the published results of the two official income surveys of 1968‐69 and 1973‐74. These results suggest firstly that the level of household income inequality in Australia has been previously understated. Secondly, it is noted that there was little, if any, change in inequality over the period. However, when families are classified by number of income earners an unambiguous decline in inequality within these groups occurs. These observations are related to other changes in the economy.

THE TREATMENT OF STOCK APPRECIATION IN THE MEASUREMENT OF NATIONAL INCOME*

In the latest official national income publication the Australian Commonwealth Statistician has altered the treatment of stock appreciation in the measurement of national income at current prices. Previously, stock appreciation had been included in both national expenditure and national product. Now the amount of stock appreciation (the difference between the change in the value of stocks and the value of the change in stocks) has been deducted from investment in stocks, and consequently national expenditure, and from trading incomes, and consequently national income. The former procedure (including stock appreciation in national expenditure and national product) had been advocated by the present author, when editor of the first official national income publications issued by the Commonwealth Statistician. In this note an attempt is made to set out the reasons for this view. A new approach is also suggested for handling the item of stock appreciation in national income accounts, which does not rest on the assumption that stock appreciation is a capital gain which should be excluded from trading incomes and national product.

ASPECTS OF THE OFFICIAL NATIONAL INCOMES TABLES OF FIJI*

This paper describes and examines three particular features of the official national income tables recently published by the Fiji Government. The need of development planners for a comprehensive set of national accounts incorporating detailed information relating to central government current expenditure, the operations of the private business sector, and the rural household economy has assumed special importance. The uses and limitations to the information contained under these specific headings is discussed and throughout an emphasis is placed on the need for the adoption of consistent and systematic methods of collection and estimation procedures to facilitate planning and decision making. As aids to more detailed interpretation and analysis, the features described are considered to be of general interest to other developing countries.

Import Structure of India

T HIS paper reports the results of a study on the import structure of India. To be more precise, the study refers to the territory which was known as British India and covers the time period from 1900 through 1946. The study of aggregate import demand has been done for the two time periods (1) 19001936, a period of 37 years (covering British India inclusive of Burma), and (2) 1900-1946, a period of 47 years (on the basis of the netof-Burma trade data as constructed for the present study). The variable to be explained is net retained private merchandise imports. Gross imports have been adjusted for re-exports and imports on government accounts. Imports in current rupee sums have been deflated by an index of import prices, and a series of net retained merchandise imports in 1939 import rupees has been obtained. Next, the total retained merchandise imports on private account in 1939 import rupees (m) have been disaggregated into three major economic categories: import of consumption goods (mi), import of intermediate goods (mi,,) and import of investment goods (mi). Each subgroup has been deflated by an appropriate price index. The results of this disaggregation, however, conform to the following identity: m 3 me + mi,ft + mi (all in 1939 import rupees). Economic theory teaches us that national income and relative prices are the two major economic variables to be used in explaining variations in the import demand of a country. Unfortunately, there is no official national income series for India for this period. Private researchers have made sporadic efforts to conc+riirt ciir.h cpritc. and la rpcent studvy has been completed for the purpose of constructing a series of national income figures for the entire period of the present study. The overall national income figures would not be expected to give good estimates. Adjustment of the available national income estimates for urban-nonurban effects, or for that matter, construction of a series on urban national income might be helpful. Not many imported goods were consumed in the rural agricultural sector of the Indian economy. Most imports were used either directly for industrial use, or indirectly for the use of the urbanized industrial sector of the economy, the income of which varied positively with the variations in the index of industrial output. Unfortunately, there is no index of industrial output for the period which could be used as a surrogate for national income. Again, there are secondary estimates,2 indices constructed by individual researchers on the basis of overall industrial activity. No index of industrial output as such was available. Activity indices have often given undue weights to financial and other quasi-industrial activities3 which may have no meaningful correlation with the import demand of the country. One approach to this problem is to make use of export earnings of the country as a proxy for national income. Ultimately, each country must be able to pay for imports by export earnings unless it has a perennial capital inflow and/or exports gold as an item of merchandise. In the particular case of India, neither exportation of gold nor such importation of capital was ever a possible course of action. As a matter of fact, over this period, India enjoyed a surplus

Age, Labor Force, and State Per Capita Incomes, 1930, 1940, and 1950

QTATE per capita incomes are computed by dividing estimated income payments to the residents of a state by the state's total population at midyear.1 This computation implicitly assumes that the denominator, total population, does not vary from one state to another in any important way. Yet it is known that states vary with respect to family size and composition, birth and death rates, participation in the labor force, and a host of other demographic attributes. It is the purpose of this paper to investigate the extent to which state differences in two of these attributes age composition and participation in the labor force -help to explain differences in state per capita incomes. Attention is confined largely to describing the direct effects on the distribution of per capita incomes among states of using alternative denominators that take account of variations in age composition and labor force participation. The study is confined to the three years, I930, I940, and I950 for which both Census data and official state income payment estimates are available.

Soviet National Income and Product in 1937

I. Introduction, 208. — II. Methodology, 215. — III. Income and outlay categories: general, 222. — IV. Income and outlay categories: the household account, 222. — V. Income and outlay categories: the consolidated net income and outlay account of government, 227. — VI. The national product by economic sector, 231. — VII. The government budget, 231. — VIII. Observations, 233. — Addendum on Soviet official income statistics, 237.