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

Title

ceqfi -- Calculates the measures of fiscal impoverishment and fiscal gains to the poor from Higgins and Lustig (2016).

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

ceqfi [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

disposable(varname) Disposable income

consumable(varname) Consumable income

final(varname) Final income

PPP conversion
ppp(real) PPP conversion factor (LCU per international $, consumption-based) from year of PPP (e.g., 2005 or 2011) to year of PPP; do not use PPP factor for year of household survey

cpibase(real) CPI of base year (i.e., year of PPP, usually 2005 or 2011)

cpisurvey(real) CPI of year of household survey

daily Indicates that variables are in daily currency

monthly Indicates that variables are in monthly currency

yearly Indicates that variables are in yearly currency (the default)

Note that the default PPP conversion factors, default poverty lines and default income cutoffs are related. See Poverty Lines options and Income group cut-offs options for a more detailed explanation.

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 designs); can also be set using svyset

Poverty lines
pl1(real) Lowest poverty line in $ PPP (default is $1.90 PPP per day)

pl2(real) Second lowest poverty line in $ PPP (default is $3.20 PPP per day)

pl3(real) Third lowest poverty line in $ PPP (default is $5.50 PPP per day)

nationalextremepl(string) National extreme poverty line in same units as income variables (can be a scalar or varname)

nationalmoderatepl(string) National moderate poverty line in same units as income variables (can be a scalar or varname)

otherextremepl(string) Other extreme poverty line in same units as income variables (can be a scalar or varname)

othermoderatepl(string) Other moderate poverty line in same units as income variables (can be a scalar or varname)

proportion(real) Relative poverty line as a proportion of median household income from 0 to 1 (default is 0.5)

Produce subset of results
nobin Do not produce results by bin

headcount Produce results for FI and FGP headcounts

headcountpoor Produce results for FI and FGP headcounts among the poor

total Produce results for total FI and FGP

percapita Produce results for per capita FI and FGP

normalized Produce results for per capita FI and FGP normalized by the poverty line

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

baseyear(real) Base year of PPP conversion (e.g., 2005, 2011)

scenario(string) scenario

group(string) Group

project(string) Project

sheetfi(string) Name of Excel sheet to write fiscal impoverishment results. Default is "E5. Fisc. Impoverishment"

sheetfg(string) Name of Excel sheet to write fiscal gains to the poor results. Default is "E6. Fisc. Gains to the Poor"

open Automatically open CEQ Master Workbook with new results added

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

Description

ceqfi calculates the measures of fiscal impoverishment (FI) and fiscal gains to the poor (FGP)
derived in Higgins and Lustig (2016): the FI and FGP headcounts (where the denominator is the total
population); the FI and FGP headcounts among the poor (where the denominator is the total number of post-fisc poor for FI or pre-fisc poor for FGP); total FI and FGP (in dollars per day adjusted for purchasing power parity [PPP]); FI and
FGP per capita (in PPP dollars per day), where k=1/|S| and S is the set of individuals in society with
cardinality |S| (i.e. total FI or FGP is divided by the total population); normalized FI and FGP,
where k = 1/(|S|z) and z is the poverty line (i.e., per capita FI or FGP as a proportion of the poverty
line); FI per impoverished and FGP per gaining poor (in PPP dollars per day); and FI per impoverished person and FGP per gaining poor as a proportion of their pre-fisc incomes.

ceqfi automatically converts local currency variables to PPP dollars, using the PPP conversion
factor given by ppp(real), the consumer price index (CPI) of the year of PPP (e.g., 2005 or
2011) given by cpibase(real), and the CPI of the year of the household
survey used in the analysis given by cpisurvey(real). The year of PPP, also called base year,
refers to the year of the International Comparison Program (ICP) that is being used, e.g. 2005 or 2011.
The survey year refers to the year of the household survey used in the analysis. If the year of PPP is
2005, the PPP conversion factor should be the "2005 PPP conversion factor, private consumption (LCU per
international $)" indicator from the World Bank's World Development Indicators (WDI). If the year of
PPP is 2011, use the "PPP conversion factor, private consumption (LCU per international $)" indicator
from WDI. The PPP conversion factor should convert from year of PPP to year of PPP. In other words,
when extracting the PPP conversion factor, it is possible to select any year; DO NOT select the year of
the survey, but rather the year that the ICP was conducted to compute PPP conversion factors (e.g.,
2005 or 2011). The base year (i.e., year of PPP) CPI, which can also be obtained from WDI, should match
the base year chosen for the PPP conversion factor. The survey year CPI should match the year of the
household survey. Finally, for the PPP conversion, the user can specify whether the original variables
are in local currency units per day (daily), per month (monthly), or per year
(yearly, the default assumption).

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 for accurate
estimates and statistical inference. The sampling weight can be entered using
[weight] or svyset. Information about complex stratified sample designs can also be entered
using svyset since ceqfi 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, ceqfi 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 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, ceqfi prints fiscal impoverishment results to a sheet titled "E5. Fisc. Impoverishment"
and fiscal gains to the poor results to a sheet titled "E6. Fisc. Gains to the Poor"; the user can
override the sheet names using the sheetfi(string) and sheetfg(string) options,
respectively. Exporting directly to the Master Workbook requires Stata 13 or newer. The Master Workbook
populated with results from ceqfi can be automatically opened if the open option is
specified (in this case, filename cannot have spaces). To produce only a portion of the results,
(i) specify only a subset of the income concept options, (ii) use nobin, or
(iii) to only produce some of the five measures produced by ceqfi, explicitly specify which
measures to produce using headcount, headcountpoor, total, percapita, normalized (if none of
these five options is specified, the default is to produce all five measures).

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.

Poverty lines options

Poverty lines in PPP dollars per day can be set using the pl1(real), pl2(real), and pl3(real) options. The default poverty
lines $1.90, $3.20 and $5.50 correspond to the income-category-specific poverty lines suggested in Joliffe & Prydz (2016), who determined the
median (to the nearest 10 cents) national poverty line in $PPP (using the 2011 ICP PPP conversion factors) for each set of countries grouped
under the World Bank's income classification system. Specifically, there are three income class-specific poverty lines: US$1.90 a day for low
income countries, US$3.20 a day for lower middle- income countries and US$5.50 a day for upper middle-income countries. Thus, in the context of
middle-income countries, we call those living on less than US$1.90 PPP per day the “ultra-poor.” The US$3.20 and US$5.50 PPP per day poverty lines
are commonly used as extreme and moderate poverty lines for Latin America and roughly correspond to the median official extreme and moderate
poverty lines in those countries. The user may specify any poverty line values. For example, to change the lowest poverty line from $1.90 PPP per
day to $1.25 PPP per day, specify pl1(1.25).

Poverty lines in local currency can be entered using the nationalextremepl(string),
nationalmoderatepl(string), otherextremepl(string), othermoderatepl(string) options. Local currency poverty lines can
be entered as real numbers (for poverty lines that are fixed for the entire population) or variable names (for poverty lines that vary, for
example across space), and should be in the same units as the income concept variables (preferably local currency units per year). The relative
poverty line can be specfied as a proportion of median household income using proportion(real), where real should be a proportion
between 0 and 1. The default proportion is 0.5, i.e. 50% of household median income. For example, to change the relative poverty line from 50% to
60% of median income (which is used by the OECD), specify proportion(0.6).

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)

. ceqfi [pw=w] using C:/Output_Tables.xlsx, hhid(hh_code) psu(psu_var) strata(stra_var) m(ym) mplusp(ymplusp) n(yn) g(yg) d(yd) c(yc) f(yf) ppp(`ppp') cpibase(`cpi05') cpisurvey(`cpi') country("Brazil") surveyyear("2008-2009") authors("Sean Higgins and Claudiney Pereira") baseyear(2005) open

Household-level data (each observation is a household)

. ceqfi [pw=w] using C:/Output_Tables.xlsx, hsize(members) psu(psu_var) strata(stra_var) m(ym) mp(ymplusp) n(yn) g(yg) d(yd) c(yc) f(yf) ppp(`ppp') cpibase(`cpi05') cpisurvey(`cpi') country("Brazil") surveyyear("2008-2009") authors("Sean Higgins and Claudiney Pereira") baseyear(2005) open

Saved results

Pending

Author

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

References

Commitment to Equity (CEQ) website.

Higgins, Sean and Nora Lustig. 2016. "Can a Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor?" Journal of Development Economics 122, 63-75.

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.