{smcl}
{* 17dec2020}{...}
{cmd:help ceqcov} (beta version; please report bugs) {right:Sean Higgins}
{hline}

{title:Title}

{p 4 11 2}
{hi:ceqcov} {hline 2} Computes covariance of the CEQ core income concepts and fiscal interventions, for the "E15. Covariance" sheet of the CEQ Master Workbook 2016 Section E

{pstd}
{ul: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.

{title:Syntax}

{p 8 11 2}
    {cmd:ceqcov} {ifin} {weight} [{cmd:using} {it:filename}] [{cmd:,} {it:options}]{break}

{synoptset 29 tabbed}{...}
{synopthdr}
{synoptline}
{syntab:Income concepts}
{synopt :{opth m:arket(varname)}}Market income{p_end}
{synopt :{opth mp:luspensions(varname)}}Market income plus pensions{p_end}
{synopt :{opth n:etmarket(varname)}}Net market income{p_end}
{synopt :{opth g:ross(varname)}}Gross income{p_end}
{synopt :{opth t:axable(varname)}}Taxable income{p_end}
{synopt :{opth d:isposable(varname)}}Disposable income{p_end}
{synopt :{opth c:onsumable(varname)}}Consumable income{p_end}
{synopt :{opth f:inal(varname)}}Final income{p_end}

{syntab:Fiscal Interventions}
{synopt :{opth p:ensions(varlist)}}Contributory pension variables{p_end}
{synopt :{opth dtr:ansfers(varlist)}}Direct transfer variables{p_end}
{synopt :{opth dtax:es(varlist)}}Direct tax variables{p_end}
{synopt :{opth cont:ribs(varlist)}}Contribution variables{p_end}
{synopt :{opth su:bsidies(varlist)}}Subsidy variables{p_end}
{synopt :{opth indtax:es(varlist)}}Indirect tax variables{p_end}
{synopt :{opth health(varlist)}}Health variables{p_end}
{synopt :{opth educ:ation(varlist)}}Education variables{p_end}
{synopt :{opth other:public(varlist)}}Other public in-kind transfers{p_end}
{synopt :{opth userfeesh:ealth(varlist)}}Health user fees variables{p_end}
{synopt :{opth userfeese:duc(varlist)}}Education user fees variables{p_end}
{synopt :{opth userfeeso:ther(varlist)}}Other public user fees variables{p_end}

{syntab:Survey information}
{synopt :{opth hs:ize(varname)}}Number of members in the household
    (should be used when each observation in the data set is a household){p_end}
{synopt :{opth hh:id(varname)}}Unique household identifier variable
    (should be used when each observation in the data set is an individual){p_end}
{synopt :{opth psu(varname)}}Primary sampling unit; can also be set using {help svyset:svyset}{p_end}
{synopt :{opth s:trata(varname)}}Strata (used with complex sampling desings); can also be set using {help svyet:svyset}{p_end}

{syntab:Ignore missing values}
{synopt :{opt ignorem:issing}}Ignore any missing values of income concepts and fiscal interventions

{syntab:Export directly to CEQ Master Workbook (requires Stata 13 or newer)}
{synopt :{opth coun:try(string)}}Country{p_end}
{synopt :{opth surv:eyyear(string)}}Year of survey{p_end}
{synopt :{opth auth:ors(string)}}Authors of study{p_end}
{synopt :{opth scen:ario(string)}}Scenario{p_end}
{synopt :{opth grou:p(string)}}Group{p_end}
{synopt :{opth proj:ect(string)}}Project{p_end}
{synopt :{opth sheet(string)}}Name of sheet to write results. Default is "E15. Covariance"{p_end}
{synopt :{opt open}}Automatically open CEQ Master Workbook with new results added{p_end}
{synoptline}
{p 4 6 2}
{cmd:pweight} allowed; see {help weights}. Alternatively, weights can be specified using {help svyset}.


{title:Description}

{pstd}
{cmd: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.

{pstd}
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 {opth dtr:ansfers(varlist)} option. Contributory pensions are specified by
{opth p:ensions(varlist)}, direct transfers by {opth dtr:ansfers(varlist)}, direct taxes (not
including contributions) by {opth dtax:es(varlist)}}, contributions (including variables for both
employer and employee contributions if applicable) by {opth co:ntribs(varlist)}, indirect subsidies
by  {opth su:bsidies(varlist)}, indirect taxes by {opth indtax:es(varlist)}, health benefits by
{opth health(varlist)}, educaiton benefits by {opth educ:ation(varlist)}, other public in-kind
benefits by {opth other:public(varlist)}, health user fees by {opth userfeesh:ealth(varlist)},
education user fees by {opth userfeese:duc(varlist)}, and other public user fees by
{opth userfeeso:ther(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 {opth health(varlist)}, {opth educ:ation(varlist)}, and {opth other:public(varlist)} options should already be net of co-payments and user fees; we nevertheless include the separate options {opth userfeesh:ealth(varlist)}, {opth userfeese:duc(varlist)}, and {opth userfeeso:ther(varlist)} so that, for example, user fees can be analyzed.

{pstd}
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 {opth hh:id(varname)} option; the {opth hs:ize(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 {opth hs:ize(varname)}; the {opth hh:id(varname)} option should not be
specified. In either case, the weight used should be the household sampling weight and should {it: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.

{pstd}
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 {help svyset}. Information about complex stratified sample designs can also be entered
using {help svyset} since {cmd:ceqcov} automatically uses the information specified using {help svyset}.
Alternatively, the primary sampling unit can be entered using the {opth psu(varname)} option and
strata can be entered using the {opth s:trata(varname)} option.

{pstd}
By default, {cmd: 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
{opt ignorem:issing} 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.

{pstd}
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).


{marker opt}
{title:Options}

{marker cor}
{dlgtab:Core options}

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

{p 8 8 2}
Notice that if the user wishes to do the CEQ {it} Assessment {sf} for both the {bf: "pensions as deferred income scenario"} and
{bf: "pensions as government transfer scenario"}, the ado does {bf: 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, {it:filename} should be changed accordingly.


{marker inc}
{dlgtab:Income concepts options}

{pstd}
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 {bf:per year} for ease of comparison
with totals from national accounts), are indicated using the {opth m:arket(varname)}, {opth mp:luspensions(varname)},
{opth n:etmarket(varname)}, {opth g:ross(varname)}, {opth t:axable(varname)}, {opth d:isposable(varname)},
{opth c:onsumable(varname)}, and {opth f:inal(varname)} options.

{pstd}
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 {browse "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 {cmd: using} in {help ceqlorenz##cor:core options}).

{pstd}
In CEQ {it} Assessments {sf} in the {bf: "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:

{p 16 16 10}
Market income given by {opth m:arket(varname)} as factor income (wages and salaries and income from capital) plus private transfers
 (remittances, private pensions, etc.) {bf: PLUS} imputed rent and own production {bf: MINUS} contributions to social insurance old-age pensions.

{p 16 16 10}
Market income plus pensions given by {opth mp:luspensions(varname)} as Market income (PDI) {bf: PLUS} contributory social
 insurance old-age pensions. Prefiscal income (PDI) is defined as Market income plus Pensions (PDI).

{p 16 16 10}
Gross Income given by {opth g:ross(varname)} as Market Income plus pensions (PDI) {bf: PLUS} direct cash and near cash
transfers (conditional and unconditional cash transfers, school feeding programs, free food transfers, etc.).

{p 16 16 10}
Net Market Income given by {opth n:etmarket(varname)} as Market Income plus pensions (PDI) {bf: MINUS} direct taxes
and {bf: MINUS} non-pension social contributions.

{p 16 16 10}
Taxable income given by {opth t:axable(varname)} as Gross Income (PDI) {bf: MINUS} all non-taxable Gross Income components.

{p 16 16 10}
Disposable income given by {opth d:isposable(varname)} as Market Income plus pensions (PDI) {bf: PLUS} all direct transfers
 {bf: MINUS} all direct taxes and non-pension social contributions.


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

{p 16 16 10}
Market income given by {opth m:arket(varname)} as factor income (wages and salaries and income from capital) plus private transfers
 (remittances, private pensions, etc.)  {bf: PLUS} imputed rent and own production. Prefiscal income (PGT) is defined as Market income (PGT).

{p 16 16 10}
Market income plus pensions given by {opth mp:luspensions(varname)} as Market income (PGT) {bf: PLUS} contributory social insurance old-age pensions.

{p 16 16 10}
Gross Income given by {opth g:ross(varname)} as Market Income plus pensions (PGT) {bf: PLUS} direct cash and near cash transfers (conditional and
 unconditional cash transfers, school feeding programs, free food transfers, etc.).

{p 16 16 10}
Net Market Income given by {opth n:etmarket(varname)} as Market Income (PGT) {bf: MINUS} direct taxes and {bf: MINUS}  non-pension
social contributions.

{p 16 16 10}
Taxable income given by {opth t:axable(varname)} as Gross Income (PGT) {bf: MINUS} all non-taxable Gross Income components.

{p 16 16 10}
Disposable income given by {opth d:isposable(varname)} as Market Income (PGT) {bf: MINUS}  all direct taxes {bf: PLUS} pension income {bf: PLUS}
 all other direct transfers {bf: MINUS} all pension and non-pension social contributions.


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

{p 16 16 10}
Consumable income given by {opth c:onsumable(varname)} as Disposable Income {bf: PLUS} indirect subsidies (energy, food and other general
 or targeted price subsidies) and {bf: MINUS} indirect taxes (VAT, excise taxes, and other indirect taxes).

{p 16 16 10}
Final income given by {opth f:inal(varname)} as Consumable income {bf: PLUS} Monetized value of in-kind transfers in education and health
 services at average government cost and {bf: MINUS} co-payments and user fees.



{title:Examples}

{pstd}Locals for PPP conversion (obtained from WDI through the {cmd: wbopendata} command){p_end}
{phang} {cmd:. local ppp = 1.5713184 // 2005 Brazilian reais per 2005 $ PPP}{p_end}
{phang} {cmd:. local cpi = 95.203354 // CPI for Brazil for 2009}{p_end}
{phang} {cmd:. local cpi05 = 79.560051 // CPI for Brazil for 2005}{p_end}

{pstd}Individual-level data (each observation is an individual){p_end}
{phang} {cmd:. 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)}{p_end}

{pstd}Household-level data (each observation is a household){p_end}
{phang} {cmd:. 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)}{p_end}

{title:Saved results}

Pending

{title:Author}

{p 4 4 2}Sean Higgins, CEQ Institute, sean.higgins@ceqinstitute.org


{title:References}

{pstd}Commitment to Equity (CEQ) {browse "http://www.commitmentoequity.org":website}.{p_end}

{pstd}Lustig, Nora, editor. 2018. {browse "https://commitmentoequity.org/publications-ceq-handbook":Commitment to Equity Handbook. Estimating the Impact of Fiscal Policy on Inequality and Poverty}. Brookings Institution Press and CEQ Institute, Tulane University. {p_end}