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

Title

ceqiop -- Estimates ex-ante inequality of opportunity by income concept for sheet "E4. Inequality of Opportunity" of the CEQ Master Workbook 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

ceqiop [if] [in] [weight] [using filename] , groupby(varlist) [options]

Required
groupby(varlist) Categorical variables that identify circumstances.
(If each observation in the data set is a household, the variable should identify
values for the household head.)

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

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)

head(string) Gives the condition identifying the household head
(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 population matrices. Default is "E4. Inequality of Opportunity"

open Automatically open CEQ Master Workbook with new results added

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

Required packages

ceqiop requires installation of oppincidence (Higgins, 2012), which is part of the CEQ Stata Package; to install, ssc install ceq, replace.

Description

ceqiop measures ex-ante inequality of opportunity for each of the CEQ core
income concepts, following the non-parametric method in Ferreira and Gignoux (2011).
Circumstance sets are specified by the variables in groupby(varlist). For example, one circumstance set could be
(female, black, parents were college graduates, urban): all individuals with those four traits are grouped together in
one circumstance set. Circumstances are pre-determined factors that are not dependent on an
individual’s effort, such as race, gender, and parents’ education or parents’ income. A smoothed income distribution
is created by assigning each individual the mean income of the individuals in his or
her circumstances set. Inequality (measured using mean log deviation) of the smoothed income distribution for each income
concept gives the measure of inequality of opportunity in levels by income concept.
This is labeled "In levels". Dividing the resulting measure by the
mean log deviation for the actual income distribution measures the ratio of inequality
due to inequality of opportunity as opposed to inequality of effort. This is labeled "In ratios".

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.
Furthermore, since the circumstance variables specified in groupby(varlist)
could be defined at the individual level, for data sets at the individual level, the
condition identifying household heads must be specified. For example, if we have a
variable called hh_status that takes a value of 1 for the household head, 2
for the spouse, etc., we would specify head(hh_status==1). If a variable name
is given rather than a condition, e.g. head(hh_status), ceqiop assumes
that household heads are individuals for whom that variable is equal to 1.

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. Furthermore, the variables given in groupby(varlist) should
be variables for the household head, e.g. a variable for gender would indicate the
gender of the household head.
In either case (household or individual level data set), 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 ceqiop 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, ceqiop 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 Output Tables if
using filename is specifed in the command, where filename is the Master Workbook. By
default, ceqiop prints to a sheet titled "E4. Inequality of Opportunity"; 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 ceqiop 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. To produce only a portion of the results, specify
only a subset of the income concept options.

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

Individual-level data (each observation is an individual)

. ceqiop [pw=w] using C:/MWB2016_E4.xlsx, groupby(sex race region) head(hh_status==1) 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)open

Household-level data (each observation is a household)

. ceqiop [pw=w] using C:/MWB2016_E4.xlsx, groupby(head_sex head_race head_region) hsize(members) psu(psu_var) strata(stra_var) m(ym) mp(ymplusp) n(yn) g(yg) t(yt) d(yd) c(yc) f(yf) open

Saved results

r(levels) Mean log deviations (MLD) of smoothed distribution

r(ratios) MLD of smoothed distribution over MLD of original distribution

Author

Sean Higgins, UC Berkeley, seanhiggins@berkeley.edu

References

Commitment to Equity (CEQ) website.

Ferreira, F. and J. Gignoux. 2011.
"The Measurement of Inequality of Opportunity: Theory and an Application to Latin America," Review of Income and Wealth 57, 622-657.

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.