Nonparametric Estimates of Age Profiles of Household Income, Consumption, Direct Taxes and Public Transfers

Eugen Koev

No 126, Discussion Papers from VATT Institute for Economic Research

Abstract: The report studies the distribution of income, expenditure, direct taxes and public transfers with respect to the age of household?s head. The data tonsist of five household budget surveys from the period 1971-1990 collected by Statistics Finland. The age- and cohort profiles of the variables are estimated using a nonparametric technique, relying purely on information from the data. The relevant decision making and consumption unit in the report is chosen to be the household, so no attempt is made to associate the different components of income, consumption and transfers with particular members of the household. The examinations are done both by household and by consumption unit. The number of consumption units in the household is determined as recommended by OECD. The age and cohort profiles are an interesting way of summarising data information and they can be also used as a first step in certain types of studies conceming welfare. The estimated age profiles of consumption are concave, as expected. Similar is the shape of age profiles of direct taxes and consumption. Disposable income is more evenly distributed than factor income, so direct taxes and income transfers equalise income among households of different age. Pensioner families are the most important recipients of income transfers, while households with children benefit most from public services. The results point out also to the fact, that the monetary value of benefits received by young families from society have in late eighties exceeded the amount of direct taxes paid by those families.

Keywords: age profile, consumption and income distribution, public transfers, nonparametric estimation, Income distribution, Tulonjako, Public services, Julkiset palvelut, Taxation, Verotus, Effectiveness of public services, Julkisten palvelujen vaikuttavuus, C140 - Semiparametric and Nonparametric Methods, D100 - Household Behavior: General, D310 - Personal Income, Wealth, and Their Distributions, E210 - Macroeconomics: Consumption; Saving, H000 - Public Economics: General, (search for similar items in EconPapers)
Date: 1996
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