- Home
- Topics
- Economy
- General eco...
- Transfers i...
- Sources, definitions, bibliography
Sources, definitions and bibliography
Transfers in kind attenuate income inequality
Insee Première N°1264 - November 2009
Sources
The breakdown of the household account is based on 2003 national-accounts data and on five INSEE surveys on income and consumption: the 2004 statistics on income and living conditions (SILC), the 2003 Taxable Income Survey, the 2006 Family Budget Survey, the 2002 Housing Survey, and the 2003 Health Survey matched with data from the national information system linking the sickness-insurance funds. Sociodemographic data are drawn from the Labour Force Survey and the 2003 satellite account for housing. We applied the INES (INSEE - Études Sociales) model for the breakdown by household of transfers in kind concerning education, childcare, the elderly, and the disabled.
Definitions
In national accounting, social transfers in kind are individual goods and services provided to households by government units or not-for-profit institutions serving households (NPISHs) free of charge or at prices that are not economically significant. They include: social benefits in kind that fall within the scope of social protection, i.e., market goods and services supplied directly by general government and those that recipient households purchase themselves and for which they are later reimbursed (medicines, healthcare); transfers of non-market individual goods and services, particularly education and health; these services are valued at the sum of production costs.
Social transfers in kind are added to final household consumption expenditures to form actual final consumption, which therefore includes all goods and services actually used or consumed, regardless of how they are paid for. Consequently, each item of actual consumption includes the share paid by the household (consumption expenditures) and the share covered by the corresponding transfer in kind.
To finance households’ actual final consumption, social transfers in kind are also added to gross disposable income.The sum is called adjusted gross disposable income.
A household’s disposable income includes income from economic activity (compensation of employees or mixed income), property income, social benefits (basic income support, family allowances, retirement pensions, unemployment benefits, sickness-insurance benefits, and maternity benefits) and other transfers in cash, net of direct taxes and social contributions.
The main direct taxes included in the computation are: income tax, occupancy tax, and two levies on taxable income earmarked for social-insurance funds: the Contribution Sociale Généralisée (CSG) and the Contribution au Remboursement de la Dette Sociale (CRDS).
As social transfers in kind are added to households’ final consumption expenditures and gross disposable income, household saving is not impacted by this accounting method, which allows comparisons between countries that provide or finance such services differently.
Primary income includes income directly linked to household participation in the production process, whether in a paid- employment or self-employment capacity. Most primary income of households consists of compensation of employees, which encompasses wages and social contributions. Primary income also includes income generated by assets, such as interest, dividends, and real-estate income.
To compare household living standards, consumption per capita does not suffice, as a household’s needs do not increase in strict proportion to its size. When several people live together, it is not necessary to multiply all consumer goods —in particular, consumer durables—by the number of household members in order to maintain constant living standards. Accordingly, to compare living standards of households of different sizes and composition, statisticians use a measure of income adjusted by consumption unit (CU) with the aid of an equivalence scale. The scale in widest use today (called the OECD scale) sets the following weights: 1 CU for the first adult household member; 0.5 CU for the other members aged 14+; 0.3 CU for children under 14.
Bibliography
- Jérôme Accardo, Vanessa Bellamy, Georges Consalès, Maryse Fesseau, Sylvie Le Laidier, and Émilie Raynaud, “Inequalities between households in the national accounts: breakdown of household accounts”, The French economy 2009 - Accounts and studies, INSEE, June 2009.
- Élise Amar, Magali Beffy, François Marical, and Émilie Raynaud, “Les services publics de santé, éducation et logement contribuent deux fois plus que les transferts monétaires à la réduction des inégalités de niveau de vie”, France, portrait social, INSEE Références series, 2008 edition.
- “National accounts - Public finances” -> “Income, purchasing power and household consumption” -> “Income, consumption and saving by household category in 2003” sub-section on the www.insee.fr website.
