This paper examines social transfers in kind (STiK) in Finland and the UK using microdata. It finds that STiK represent 31.3% and 23.6% of disposable income in Finland and the UK respectively based on national accounts, but microdata only captures 51.5% and 70% of STiK. The paper also finds that including STiK significantly reduces income inequality and poverty rates in both countries. However, the results for Finland may be impacted by underreporting of STiK in the microdata. Key issues discussed include whether to value health STiK based on actual consumption or an insurance approach.

1. FLORIAN SCHWAHN:
SOCIAL TRANSFERS IN KIND AND
ECONOMIC WELL-BEING: RELEVANCE,
IMPLICATIONS AND POSSIBLE SOLUTIONS
IARIW-conference, August 24 – 30, 2014
Session 3
Discussant:
Peter van de Ven
Head of National Accounts, OECD

2. Main topics of the paper
• Which Social Transfers in Kind (STiK), as defined in
national accounts, should (not) be allocated to
households in analysing distribution of income across
households?
• Issue addressed from a conceptual point of view:
– What is the purpose of including STiK, when analysing income
distribution?
– How can the results of the extended income concept (including
STiK) be interpreted and communicated (related to perceptions
of households)?
• The paper is a first attempt to develop criteria for (not)
allocating STiK => such a discussion is very welcome
indeed
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3. Social Transfers in Kind in general
• Countries typically have different institutional arrangements
for providing services such as health, education, sports,
culture, etc.
• In many countries these services are provided for free, or
reimbursed, by government; as such, they are recorded as
part of government consumption (or consumption of NPISHs)
• To allow for a better international comparison, System of
National Accounts contains two definitions for household
disposable income and household consumption, by
introducing the concept of Social Transfers in Kind (STiK)
• STiK are equal to all individual goods and services provided
free or at economically insignificant prices, provided by
government and NPISHs (excludes collective consumption)
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4. Social Transfers in Kind in general
• Household Disposable Income plus STiK equals Household
Adjusted Disposable Income
• Household Final Consumption Expenditure plus STiK equals
Household Actual Final Consumption
• Savings of households not affected
• Note: STiK have been defined on the basis of certain categories of
COFOG (excluding elements related to general adminsitration,
regulation and research):
– 07 Health
– 08 Recreation, culture and religion
– 09 Education
– 10 Social protection
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5. International comparison of GDP and
Household Adjusted Disposable Income

6. Overview of the paper
• What to do in analysing distribution of income and
consumption?
• Canberra handbook: “consensus on definitions and
methods is lacking” and “STiK is excluded … due to
practical measurement issues”
• This paper takes a more conceptual angle in relation to
allocating STiK to individual households => what is the
appropriate income concept
• “Economic well-being” versus “economic resources”
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7. Overview of the paper
• …
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8. Overview of the paper
• …
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9. Overview of the paper
• Section 3.2 then discusses the application of these criteria to
Germany and USA
• Section 4 discusses the various imputation methods:
– Actual use
– Insurance
– Social insurance
– Amortisation
• Section 5 deals with the availability of data sources to impute the
various STiK-elements to individual households
• Section 6 contains a summary of conclusions
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10. Discussion on allocating STiK
• I like the paper very much, as it challenges you to think about the
appropriateness of allocating STiK for analysis of income
distribution
• Personally, I am not yet convinced of their proposal to look at
“economic well-being”, mainly because of the subjective elements
feeding into the evaluation of the proposed criteria
• If one goes this way, why restrict it to STiK, why not extend it to cash
income elements?
• More generally, income versus (economic) well-being
• Also look at impact on consumption expenditure, not only income
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11. Discussion on allocating STiK
• Other possible criteria:
– Alignment with national accounts (although one could of course
also reconsider the concept of STiK in national accounts
– International comparability
– Alignment of recording of various systems, certainly when two or
more systems exist within a country
– Consistency over time, impact on disposable income and
consumption should be independent from changes over time
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12. Example on recording health
Private insurance Public health
Premiums/taxes 100 100
Claims 500 500
NA Micro AC INS
Disp.Income 400 -100 -100 -100
Adj.Disp.Income 400 -100 400 0
Fin.Cons.Exp. 500 0 0 0
Actual Cons. 500 0 500 100
Savings -100 -100 -100 -100
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13. Discussion on allocating STiK
• How to arrive at less subjective criteria?
• What about looking at cash income elements?
• How does the author look upon the additional concerns and/or
criteria?
• Isn’t it much more about what people perceive as income, what
people considered as low/high income, being poor/rich in terms of
income?
• However, should we go that way, or should we “simply” define an
objective income concept, without giving too much consideration to
“well-being” and/or perceptions?
Read the paper!
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14. Thank you for your attention!
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15. RICHARD TONKIN, NATHAN THOMAS, JAMES
LEWIS, VELI-MATTI TÖRMÄLEHTO AND MIRA
KANJANTIE:
SOCIAL TRANSFERS IN KIND IN THE UNITED
KINGDOM AND FINLAND: MICRO-LEVEL
MEASUREMENT AND DISTRIBUTIONAL
IMPACT
IARIW-conference, August 24 – 30, 2014
Session 3
Discussant:
Peter van de Ven
Head of National Accounts, OECD

16. Main topics of the paper
Social Tranfers in Kind (STiK) in Finland and UK, based on
micro-data
•General description, including comparison with macro-data
from national accounts and methodology
•Impact of STiK on income distribution by income quintile,
including impact of using different equivalence scales
•Impact of STiK on income poverty measures
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17. General overview of STiK
• …
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18. Micro-macro comparison
Main results:
•STiK (according to National Accounts)
– Finland: 31.3% of disposable income
– UK: 23.6% of disposable income
•Micro-macro coverage rate of STiK (unadjusted):
– Finland: 51.5% (80.6% for education, 75.9 % for health)
– UK: 70.0% (107.6% for education, 94.6% for health)
•Micro-macro coverage rate of final consumption expenditure:
– Finland: 89.5%
– UK: 58.5%
•Micro-macro coverage rate of disposable income:
– Finland: 81.8%
– UK: 75.1% 18

19. Micro-macro comparison, cont.
Typical differences of STiK (micro perspective):
•Exclusion of people living in institutions
•Exclusion of culture, sports and recreation
•Exclusion of non-childcare elements of social care (UK)
•Sampling and measurement errors
Questions:
•Given these coverage rates, what could/should be done to
improve the micro-data?
•Bottom part of Table 2.1.1 on social transfers in kind
(received – paid)?
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20. Methodology estimating micro-STiK
• Methodology for estimating education, health care and other items
in sections 3.1, 3.2 and 3.3
• One major issue related to health care: “actual consumption
approach” versus “insurance based approach”:
– Well-being argument: Ill people better off than healthy people
with the same cash income? Ill people benefit from being sick?
=> well-being versus economic resources
– Impact on consumption?
– Consistency with (private) non-life insurance claims?
– International comparability?
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21. Example on recording health
Private insurance Public health
Premiums/taxes 100 100
Claims 500 500
NA Micro AC INS
Disp.Income 400 -100 -100 -100
Adj.Disp.Income 400 -100 400 0
Fin.Cons.Exp. 500 0 0 0
Actual Cons. 500 0 500 100
Savings -100 -100 -100 -100
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22. Methodology estimating micro-STiK
• Methodology for estimating education, health care and other items
in sections 3.1, 3.2 and 3.3
• One major issue related to health care: “actual consumption
approach” versus “insurance based approach”:
– Well-being argument: Ill people better off than healthy people
with the same cash income? Ill people benefit from being sick?
=> well-being versus economic resources
– Impact on consumption?
– Consistency with (private) non-life insurance claims?
– International comparability?
Questions:
• What’s the authors’ opinion on this issue?
• Should adjusted disposable income also be used for allocating
people to quintiles? 22

23. Distributional impact of STiK
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24. Distributional impact of STiK
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25. Distributional impact of STiK
S80/20-ratio Finland UK
•Income before taxes/benefits 13.8 15.1
•Disposable income 4.8 5.7
•Adjusted disposable income 3.7 3.7
Question on the Finnish results: How much may the results
be affected by the quite significant underreporting of STiK?
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26. Alternative equivalence scales
Alternative 1: OECD (1 – 0.5 – 0.3)
Alternative 2: Simplified Needs Adjusted (SNA => sic!)
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27. Alternative equivalence scales
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28. Impact of STiK on income poverty rates
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29. Impact of STiK on income poverty rates
• Significant reduction of poverty rates
• Reversal of rates in UK and Finland
• UK: Impact largest for young people and people > 65
• Finland: Significant reduction for young people, however
increase of poverty rate for people > 65 (only health
care, then decrease)
• Impact of alternative equivalence scales relatively
modest at macro-level (more apparent when looking at
rates by age group)
Question on the Finnish results: How much may the results
be affected by the quite significant underreporting?
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30. To conclude
• Good overview of issues related to the measurement of
STiK
• Good overview of the possible impact on income
distribution when including STiK and/or applying different
assumptions for allocating health and using equivalence
scales
• I would have preferred to see slightly more on possible
reasons for underreporting and ways to address this
• Read it!
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31. Thank you for your attention!
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