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Household Income, Demand, and Saving: Deriving Macro Data with Micro Data Concepts
- 1. Household Income, Demand, and Saving: Deriving Macro Data with Micro Data Concepts Barry Cynamon and Steve Fazzari Post Keynesian Conference Kansas City, September, 2014
- 2. Acknowledgment • Co-authored work with Barry Cynamon • Thanks to the Institute for New Economic Thinking for generous financial support
- 3. Motivation – Part 1 • Demand effects of household sector • Consumption drives much of the economy • PCE vs. what households actually spend • Prime example: residential construction vs. imputed rent on owner-occupied housing
- 4. Motivation – Part 2 • Disaggregation of household flows using household micro data • Example: recent work with Barry on rising inequality and consumption • Need disaggregated data • Inconsistency between representative surveys and macro measures • Not just sampling error; important conceptual differences
- 5. Objectives: Measure Actual Cash Flows • Eliminate imputed value of services in consumption • Spending versus some concept of “utility” • Eliminate spending not controlled by households • Example: Medicare • Cash flow concept of disposable income • Flow of funds under household control • Concept likely to correspond better with flows households report on surveys • Household financial flows the way households actually see these flows
- 6. Key Identity • Accounting identity maintained before and after adjustments: Disposable Household Personal Financial Income = Consumption + Investment + Transfers + Saving • Identity holds in NIPA • Household investment not distinguished from financial saving • Adjustments to consumption or income require balancing change elsewhere • HH Demand = Cons. + HH Investment
- 7. Housing Example (2011 $billions) Disp. Income Cons. HH Invest. Pers. Trans. Fin. Saving Implicit Rent -1236 -1236 Intermediate Inputs + 197 + 197 Mortgage Interest + 469 + 469 Depreciation + 209 + 209 New Construction + 283 - 283 Single-Family Homes • Eliminate “rent home to yourself” business • Effect on household demand: -1236 + 197 + 283 = -756 • Effect on disp. income = -361 (but transfer expenditure up by 469)
- 8. Other Important Categories • About 40 (!) separate adjustments • Remove “NPISH” sector • Free financial services • Medical care • Employer and government, not households • “Other” demand • Retirement accounting • Exclude payments by employers and government • Include benefits from plans
- 9. SO WHAT?
- 10. Per Capita Personal Income NIPA (gray) – SCF (blue) –Our Adjusted Measure (red) $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 1988 1991 1994 1997 2000 2003 2006 2009
- 11. Per Capita Personal Outlays NIPA (gray) –PSID Cooper (blue) –Our Adjusted Measure (red) $35,000 $33,000 $31,000 $29,000 $27,000 $25,000 $23,000 $21,000 $19,000 $17,000 $15,000 1984-1988 1989-1993 1994-1998 1999-2000 2001-2002 2003-2004 2005-2006 2007-2008 2009-2010
- 12. Demand-Disposable Income Ratios NIPA PCE / DPI (black) –Adj. Cons / Adj. DPI (gray) –Adj. HH Demand / Adj. DPI (red) 100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 80% 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 HH Demand to Adj DI NIPA PCE to NIPA DPI Adj Consumption to Adj DI
- 13. Outlays (with interest) to Disp. Income 120% 115% 110% 105% 100% 95% 90% 85% 80% 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 HH Demand to Adj DI NIPA PCE to NIPA DPI
- 14. Medical Spending Paid for by Others Ratios to Adjusted GDP 75% 70% 65% 60% 55% 50% 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 NIPA PCE / GDP (HH demand + non-HH healthcare) / adjusted GDP HH demand / adjusted GDP
- 15. Different Saving Rates 15% 10% 5% 0% -5% -10% -15% 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 NIPA saving rate adjusted gross saving rate adjusted financial saving rate