help ceqcov (beta version; please report bugs) Sean Higgins

Title

ceqcov -- Computes covariance of the CEQ core income concepts and fiscal interventions, for the "E15. Covariance" sheet of the CEQ Master Workbook 2016 Section E

Caution: The construction of the CEQ income concepts Market Income, Market Income plus Pensions, Net Market Income, Gross Income, and Taxable Income will differ depending on which scenario for the public contributory pension system has been chosen. In the public contributory Pensions as Deferred Income (PDI) scenario, pension system income is treated as (Market) income earned previously deferred until today; while pension system contributions are treated as mandatory savings (income deferred to one’s future self). In contrast, the contributory Pensions as Government Transfer(PGT) scenario, pension system income is treated as a pure transfer (from the fisc), while pension system contributions are treated as a tax. In the PDI scenario pensions are prefiscal income while in the PGT scenario the public contributory pension system is a fiscal tax and transfer system that redistributes income from today’s working-age population to today’s pension-age population. When the user wishes to analyze both PDI and PGT scenarios, this command must be run twice: once for outputting information generated under the PDI scenario to a Masterworkbook (section E); and again for outputting information generated under the PGT scenario to its own Masterworkbook (section E). See also the Income concepts options section below for more detail.

Syntax

ceqcov [if] [in] [weight] [using filename] [, options]

Income concepts
market(varname) Market income

mpluspensions(varname) Market income plus pensions

netmarket(varname) Net market income

gross(varname) Gross income

taxable(varname) Taxable income

disposable(varname) Disposable income

consumable(varname) Consumable income

final(varname) Final income

Fiscal Interventions
pensions(varlist) Contributory pension variables

dtransfers(varlist) Direct transfer variables

dtaxes(varlist) Direct tax variables

contribs(varlist) Contribution variables

subsidies(varlist) Subsidy variables

indtaxes(varlist) Indirect tax variables

health(varlist) Health variables

education(varlist) Education variables

otherpublic(varlist) Other public in-kind transfers

userfeeshealth(varlist) Health user fees variables

userfeeseduc(varlist) Education user fees variables

userfeesother(varlist) Other public user fees variables

Survey information
hsize(varname) Number of members in the household
(should be used when each observation in the data set is a household)

hhid(varname) Unique household identifier variable
(should be used when each observation in the data set is an individual)

psu(varname) Primary sampling unit; can also be set using svyset

strata(varname) Strata (used with complex sampling desings); can also be set using svyset

Ignore missing values
ignoremissing Ignore any missing values of income concepts and fiscal interventions

Export directly to CEQ Master Workbook (requires Stata 13 or newer)
country(string) Country

surveyyear(string) Year of survey

authors(string) Authors of study

scenario(string) Scenario

group(string) Group

project(string) Project

sheet(string) Name of sheet to write results. Default is "E15. Covariance"

open Automatically open CEQ Master Workbook with new results added

pweight allowed; see weights. Alternatively, weights can be specified using svyset.

Description

ceqcov calculates the covariance between core income concepts or fiscal
interventions and fractional rank in the income distribution. These covariances
are useful because they are a building block of the calculation of the Gini coefficient
and concentration coefficients.

The fiscal interventions are specified using fiscal intervention options. Note that each option takes
a varlist that can (and often should) have greater than one variable: the variables provided should
be as disaggregated as possible. For example, there might be survey questions about ten different
direct cash transfer programs; each of these would be a variable, and all ten variables would be
included with the dtransfers(varlist) option. Contributory pensions are specified by
pensions(varlist), direct transfers by dtransfers(varlist), direct taxes (not
including contributions) by dtaxes(varlist)}, contributions (including variables for both
employer and employee contributions if applicable) by contribs(varlist), indirect subsidies
by subsidies(varlist), indirect taxes by indtaxes(varlist), health benefits by
health(varlist), educaiton benefits by education(varlist), other public in-kind
benefits by otherpublic(varlist), health user fees by userfeeshealth(varlist),
education user fees by userfeeseduc(varlist), and other public user fees by
userfeesother(varlist). Tax and contribution variables may be saved as
either positive or negative values, as long as one is used consistently for all tax and contribution
variables. The same goes for user fees variables. The variables provided in the health(varlist), education(varlist), and otherpublic(varlist) options should already be net of co-payments and user fees; we nevertheless include the separate options userfeeshealth(varlist), userfeeseduc(varlist), and userfeesother(varlist) so that, for example, user fees can be analyzed.

If the data set is at the individual level (each observation is an individual), the variable with the
identification code of each household (i.e., it takes the same value for all members within a
household) should be specified in the hhid(varname) option; the hsize(varname) option
should not be specified. If the data set is at the household level, the number of members in the
household should be specified in hsize(varname); the hhid(varname) option should not be
specified. In either case, the weight used should be the household sampling weight and should not
be multiplied by the number of members in the household since the program will do this multiplication
automatically in the case of household-level data.

There are two options for including information about weights and survey sample design so that the
poverty estimates and p-values are calculated correctly. The sampling weight can be entered using
[weight] or svyset. Information about complex stratified sample designs can also be entered
using svyset since ceqcov automatically uses the information specified using svyset.
Alternatively, the primary sampling unit can be entered using the psu(varname) option and
strata can be entered using the strata(varname) option.

By default, ceqcov does not allow income concept or fiscal intervention variables to have missing
values: if a household has 0 income for an income concept, receives 0 from a transfer or a subsidy,
or pays 0 of a tax, the household should have 0 rather than a missing value. If one of these variables has
missing values, the command will produce an error. For flexibility, however, the command includes an
ignoremissing option that will drop observations with missing values for any of these variables, thus
allowing the command to run even if there are missing values.

Negative incomes are allowed, but a warning is issued for each core income concept and fiscal intervention that
has negative values (or positive values when a fiscal intervention is stored as negative values). This is because
various measures are no longer well-behaved when negative values are included (for example, the Gini coefficient,
concentration coefficient, or squared poverty gap can exceed 1, and other desirable properties of these measures
when incomes are non-negative no longer hold when negative values are allowed).

Options

Core options

using is required, and indicates the filename for the output. Results are automatically exported to the CEQ Master Workbook if using
filename is specifed in the command, where filename is the Master Workbook. By default,
ceqcov prints to a sheet titled "E15. Covariance"; the user can override the sheet
name using the sheet(string) option. Exporting directly to the Master Workbook requires Stata 13
or newer. The Master Workbook populated with results from ceqcov can be automatically opened if
the open option is specified (in this case, filename cannot have spaces). Results are also
saved in matrices available from return list.

Notice that if the user wishes to do the CEQ Assessment for both the "pensions as deferred income scenario" and
"pensions as government transfer scenario", the ado does NOT run both scenarios automatically. The user must run the
ado twice, one time per scenario (see Income concepts options for an explanation on the differences across
scenarios), and create two separate sets of E sheets. Hence, filename should be changed accordingly.

Income concepts options

The CEQ core income concepts include market income, market income plus pensions, net market income, gross income,
taxable income, disposable income, consumable income, and final income. The variables for these income
concepts, which should be expressed in local currency units (preferably per year for ease of comparison
with totals from national accounts), are indicated using the market(varname), mpluspensions(varname),
netmarket(varname), gross(varname), taxable(varname), disposable(varname),
consumable(varname), and final(varname) options.

The public contributory old-age pension system can be incorporated into a CEQ Assessment as deferred income or as a government transfer (for a detailed discussion regarding
the alternatives see Lustig (2018) available at http://commitmentoequity.org/publications-ceq-handbook). The decision regarding the public contributory pension system can have a significant impact on assessing the redistributive power of a fiscal system, especially in countries with a high proportion of retirees and large spending on social security. The construction of Market income, Market income plus pensions, Gross income, Net market income, and Taxable Income will differ between the PDI and PGT scenarios (while Disposable income, Consumable income and Final income are equivalent in value in both scenarios). The user must create two separate sets of E sheets, one per scenario (for a more detailed
explanation see using in core options).

In CEQ Assessments in the "pensions as deferred income scenario", it is assumed that contributions
during working years are a form of “forced saving” and income concepts are defined in the following way:

Market income given by market(varname) as factor income (wages and salaries and income from capital) plus private transfers
(remittances, private pensions, etc.) PLUS imputed rent and own production MINUS contributions to social insurance old-age pensions.

Market income plus pensions given by mpluspensions(varname) as Market income (PDI) PLUS contributory social
insurance old-age pensions. Prefiscal income (PDI) is defined as Market income plus Pensions (PDI).

Gross Income given by gross(varname) as Market Income plus pensions (PDI) PLUS direct cash and near cash
transfers (conditional and unconditional cash transfers, school feeding programs, free food transfers, etc.).

Net Market Income given by netmarket(varname) as Market Income plus pensions (PDI) MINUS direct taxes
and MINUS non-pension social contributions.

Taxable income given by taxable(varname) as Gross Income (PDI) MINUS all non-taxable Gross Income components.

Disposable income given by disposable(varname) as Market Income plus pensions (PDI) PLUS all direct transfers
MINUS all direct taxes and non-pension social contributions.

In the "pensions as government transfer scenario", it is assumed that pensions are a pure government transfers and income concepts are defined in the following way:

Market income given by market(varname) as factor income (wages and salaries and income from capital) plus private transfers
(remittances, private pensions, etc.) PLUS imputed rent and own production. Prefiscal income (PGT) is defined as Market income (PGT).

Market income plus pensions given by mpluspensions(varname) as Market income (PGT) PLUS contributory social insurance old-age pensions.

Gross Income given by gross(varname) as Market Income plus pensions (PGT) PLUS direct cash and near cash transfers (conditional and
unconditional cash transfers, school feeding programs, free food transfers, etc.).

Net Market Income given by netmarket(varname) as Market Income (PGT) MINUS direct taxes and MINUS non-pension
social contributions.

Taxable income given by taxable(varname) as Gross Income (PGT) MINUS all non-taxable Gross Income components.

Disposable income given by disposable(varname) as Market Income (PGT) MINUS all direct taxes PLUS pension income PLUS
all other direct transfers MINUS all pension and non-pension social contributions.

The construction of Consumable and Final income is done in the same way in both the PDI and PGT scenarios:

Consumable income given by consumable(varname) as Disposable Income PLUS indirect subsidies (energy, food and other general
or targeted price subsidies) and MINUS indirect taxes (VAT, excise taxes, and other indirect taxes).

Final income given by final(varname) as Consumable income PLUS Monetized value of in-kind transfers in education and health
services at average government cost and MINUS co-payments and user fees.

Examples

Locals for PPP conversion (obtained from WDI through the wbopendata command)

. local ppp = 1.5713184 // 2005 Brazilian reais per 2005 $ PPP

. local cpi = 95.203354 // CPI for Brazil for 2009

. local cpi05 = 79.560051 // CPI for Brazil for 2005

Individual-level data (each observation is an individual)

. ceqcov [pw=w] using C:/MWB2016_E15.xlsx, hhid(hh_code) psu(psu_var) strata(stra_var) m(ym) mplusp(ymplusp) n(yn) g(yg) t(yt) d(yd) c(yc) f(yf) pens(pensions) dtax(income_tax property_tax) cont(employee_contrib employer_contrib) dtransfer(cct noncontrip_pens unemployment scholarships food_transfers) indtax(vat excise) subsidies(energy_subs) health(basic_health preventative_health inpatient_health) education(daycare preschool primary secondary tertiary) userfeeshealth(ufee_basichealth ufee_impatienthealth) userfeeseduc(ufee_daycare ufee_preschool ufee_primary)

Household-level data (each observation is a household)

. ceqcov [pw=w] using C:/MWB2016_E15.xlsx, hsize(members) psu(psu_var) strata(stra_var) m(ym) mp(ymplusp) n(yn) g(yg) t(yt) d(yd) c(yc) f(yf) pens(pensions) dtax(income_tax property_tax) cont(employee_contrib employer_contrib) dtransfer(cct noncontrip_pens unemployment scholarships food_transfers) indtax(vat excise) subsidies(energy_subs) health(basic_health preventative_health inpatient_health) education(daycare preschool primary secondary tertiary) userfeeshealth(ufee_basichealth ufee_impatienthealth) userfeeseduc(ufee_daycare ufee_preschool ufee_primary)

Saved results

Pending

Author

Sean Higgins, CEQ Institute, sean.higgins@ceqinstitute.org

References

Commitment to Equity (CEQ) website.

Lustig, Nora, editor. 2018. Commitment to Equity Handbook. Estimating the Impact of Fiscal Policy on Inequality and Poverty. Brookings Institution Press and CEQ Institute, Tulane University.