THE ECONOMIC WELFARE OF THE AGED AND INCOME SECURITY PROGRAMS*

This paper examines several nonmoney components of economic welfare in both a theoretical and an empirical framework, computes the distributional ranking of aged families arising from such a measure, and subsequently examines the target effectiveness of eleven programs of the U.S. federal government aimed at the aged. While the theoretical discussion attempts to cover all factors contributing to the economic welfare of the aged, the empirical measure is somewhat less comprehensive, excluding the value of nonmarket productive activities and leisure time as well as benefits derived from direct government expenditures and some in-kind transfers and taxes. The study makes use of a subsample of the 1967 Survey of Economic Opportunity data composed of all families with at least one aged member. Specific attention is devoted to dissaving from net worth, in-kind transfers, incidence of taxes, and intrafamily transfers. Government cash and in-kind transfers are found to constitute a third of the total measured economic welfare of the aged, and the impact of each of these programs is examined individually. As might be expected, public assistance and public housing are the programs of most benefit to the aged poor. Medicaid and Medicare are substantially less so, and Social Security is distributionally neutral. Such programs as unemployment insurance are of little benefit to the aged. Tax expenditures, finally, provide no benefits to even the lower half of the distribution.     

NATIONAL ACCOUNTING AND INCOME DISTRIBUTION

Conventional national accounts are often seen as concentrating on the production process, on how goods and services are produced, rather than on consumption, or who the products serve. Production finances consumption via income generation, distribution and re-distribution. This paper demonstrates this inter-action by elaborating a full economic accounting matrix, and takes both theoretical and practical considerations into account. The aim is to explore how far the revised SNA can and should give emphasis to issues of income distribution and consumption.     

CONCEPT AND DEFINITION OF INCOME IN THE NATIONAL ACCOUNTS

It is a truism that the national accounts have engendered their own concept of income which is different from other contexts such as business accounting, taxation or welfare analysis. Less known are the principles on which this income concept is based. This article is an attempt to specify such principles, investigating in particular the role of the transaction principle, and to derive an income concept therefrom. The crucial point of the argument is whether or not it is appropriate within the system of the national accounts to assign an income to sectors other than the households. The theory is applied to some practical questions which have been discussed in the process of the revision of the SNA.     

SELECTED PROBLEMS OF WELFARE AND PRODUCTION IN THE NATIONAL ACCOUNTS

A number of rather traditional problems relating to the estimation of the national accounts have been raised in the recent literature. This paper examines five of these problems from the point of view of a government statistician working within certain time and resource constraints. Credibility, comprehensibility, theoretical validity, cost and analytical usefulness are the criteria which should aid in deciding how to treat such matters as the extension of the boundaries of economic production, proposed changes in the categorization of both final and intermediate expenses, the treatment of "total" welfare and estimation relating to the so-called underground economy.     

THE EFFECT OF UNEMPLOYMENT BENEFITS, WELFARE BENEFITS, AND OTHER INCOME ON PERSONAL BANKRUPTCY

Personal bankruptcy, unemployment insurance, and Aid to Families with Dependent Children provide income and wealth insurance. Because they have similar purposes, it should not be surprising that some households use more than one of these programs or that the programs are substitutes. This study contributes to the personal bankruptcy literature by examining this interaction and finds that increases in unemployment benefits decrease the probability of bankruptcy. (JEL D12 , K35 )     

EXPANDING IMPUTED VALUES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS*

After defining economic activity the author lists the chief types of non–market economic activities for which he has prepared estimates for the United States 1929–1973, and briefly describes his methodology and data sources. Some major findings are: (1) As of 1973 GNP adjusted to include the additional imputations was 63.5 percent larger than the official estimate. (2) At least since 1929 imputed values have grown faster than official GNP, especially when both are measured in terms of real factor costs. (3) The personal sector comprises a far larger portion of the national economy-almost one-third—when account is taken of imputed labor and property compensation, and its relative importance has grown. (4) Gross government product is more than 60 percent higher when the imputed rental value of public property is added to the compensation of general government employees. (5) Reflecting the relative growth of non-business wealth, imputed property income has risen much faster than monetized property income. This has mitigated the decline in the property share of expanded gross national income compared with its share in the official estimates.     

LIFETIME AND VERTICAL INTERTEMPORAL INEQUALITY, INCOME SMOOTHING, AND REDISTRIBUTION: A SOCIAL WELFARE APPROACH

Between and within-households intertemporal inequality indices are proposed to highlight the vertical and lifetime (i.e. cyclical) components of overall intertemporal inequality. Comparison with the classical static inequality indices is made. Income redistribution and smoothing (i.e. stabilization) are conveniently defined as the public policy impact on welfare, by means of the relative increase in intertemporal vertical and cyclical equity, respectively. The issue is important as many public policies are aimed at both (vertical and cyclical equity) objectives. Our approach provides a more appropriate evaluation of the desirability of public reforms aimed at achieving a greater vertical and cyclical equity, within a social welfare framework.     

A SOCIAL WELFARE VIEW OF THE MEASUREMENT OF INCOME EQUALITY

Economists' use of the term "equality" in reference to a distribution of incomes has historically been in the sense of a consensus for some statistical characteristic(s) of the distribution rather than a firm concept of equality. Of course such a concept rests on appropriate welfare assumptions about income and its distribution, assumptions which, for the most part, have been left implicit (and unknown) in discussions of income equality in the literature.
Our purpose in this paper is dual: first, we wish to discover an unambiguous, welfare-related equality measure. This we accomplish through suitable assumptions on a social welfare function. What is produced is an "index" of equality which describes the performance of a given distribution relative to the maximum welfare derivable from the total income it represents. The measure thus depends functionally on the welfare attributes of income, something which in reality we know little about.
This impasse leads us to inquire into the sensitivity of the index over specifications of the welfare function, which is done by comparing equality ranks for the states of the United States for 1960 under various functional forms and among curves within a given form. As an interesting secondary issue, the performance of traditional equality measures is tested relative to the welfare-oriented index to discover implications about their welfare content.
It is found that the equality index is, in certain ranges for the welfare function, insensitive to its specification. The findings lead directly to conclusions concerning traditional equality measures, their usefulness in correctly accounting for equality differences among alternative income distributions and, concomitantly, their implicit welfare inputs.     

AGGREGATE HEALTH EXPENDITURES, NATIONAL INCOME, AND INSTITUTIONS FOR PRIVATE PROPERTY

Being careful about the potential for endogeneity bias, I find robust evidence that "institutions for private property" share a more fundamental relationship with health expenditures than does national income. This research should interest a wide audience. First, health scholars may be interested in its relatively careful estimate of income's relationship to health spending. Second, institutions and commitment scholars should be interested in its evidence of institutions' primacy in a heretofore overlooked, but theoretically and substantively attractive, application. Finally, policy entrepreneurs may find important the implication that reforming governance structures can be more productive than is directly funding health services.

A useful model of the macroaspect or even microaspects of an economy must build the institutional constraints into the model.

(North, 1990, p. 112)