the national transfer accounts for kenya germano mwabu moses k. muriithi reuben g. mutegi university...
TRANSCRIPT
THE NATIONAL TRANSFER ACCOUNTS FOR KENYA
Germano Mwabu Moses K. Muriithi
Reuben G. Mutegi
University of Nairobi January 10, 2009
1
1. Introduction• Fertility rate in Kenya has declined
significantly over the past three decades from 8.1 in the early 1980s to a low of about 5.0 (KDHS 2003) .
• Kenya’s total fertility rate is higher than the Africa’s average TFR of 4.7 (UN 2007).
• Despite the decline in fertility life expectancy in Africa remains low, at 49 years (in Kenya, it’s 50; in Nigeria, 44; and less than 40 in countries severely affected by HIV/AIDS).
2
Intro…
• The NTA framework can generate information that can be used to guide investments in human capital; to further reduce fertility and improve living conditions in the continent.
3
2. Estimates of NTA profiles using 1994 survey
• Labor income profiles
• Public and private consumption profiles, with macro controls
• Life cycle deficit
• Tax profiles
(Brief comparisons are made between Kenyan and Nigerian profiles)
4
Labor income profiles
• Figure 1 below shows the labor income profiles for both the wage earners and non-wage earners in 1994.
• On average, earning of labor income in Kenya starts at an early age of 18 years.
• There is no retirement in the self-employment sector, in contrast to the situation in the formal wage sector, where wage income drops sharply after age 55.
• Maximum mean labor income is attained at around age 40.
5
Figure1: Labor profile (Kenya, 1994)
Per Capita Adjusted Smoothed Wage and Self-Employed Labor Income (Kenya, 1994)
-10000
0
10000
20000
30000
40000
50000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80
Age
Ken
ya S
hillin
gs
Wage Imputed Self-Employed IncomeUnimputed Self-Employed Income Total labor income
6
Public consumption age profile
• Figure 2 shows estimated profiles of per capita public consumption in education, health care and public other consumption.
• As expected, education expenditure is pronounced between the age of 3 and 25 years.
• Highest at between age 6 and 19 years, meaning at primary and secondary education levels.
• Public health consumption has the horizontal J-shape after age 20.
• Public other consumption has a horizontal age- profile.(Kenya’s per capita public consumption > Nigeria’s).
7
Figure: 2 Public consumption Profile (Kenya,1994)
Per Capita Public Consumption, Kenya, 1994
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
0 10 20 30 40 50 60 70 80 90+
Age
Ksh
illin
gs
Public Consumption
HealthEducation
8
Public consumption Kenya and Nigeria
Composition of Public Consumption in Health and Education
0.000
0.010
0.020
0.030
0.040
0.050
0.060
0.070
0 10 20 30 40 50 60 70 80 90+
Age in years
Nor
mal
ised
to a
vera
ge la
bour
in
com
e ag
es 3
0-49
yea
rs
Kenya Education (Public) Kenya Health (Public)
Nigeria, Education (Public) Nigeria, Health (Public)
9
Private health consumption Profile
• Private health consumption has a horizontal a J-shape.
• Children below the age of 10 are more likely to be sick and to seek medical care relative to individuals at other age groups.
• Private health consumption increases sharply from age 45 due to incidence of age-related ailments.
10
Figure 3: Private health consumption Profile (Kenya, 1994)
Adjusted Per Capita Private Health (Kenya, 1994)
-
50
100
150
200
250
300
350
400
450
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80
Age
Ken
ya S
hilli
ngs
Adjusted Smooth
Adjusted Unsmoothed
11
Private Education profile
• The dip at age 13 in Figure 4 could be associated with an influx of students from private primary school to government secondary schools.
• The sharp rise after age 13 is related to private spending in private secondary schools and colleges.
12
Figure 4: Private education consumption expenditure
Adjusted Per Capita Private Education (Kenya, 1994)
0
50
100
150
200
250
300
350
400
450
500
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81
Age
Ke
ny
a s
hillin
gs
13
Private other consumption profiles
• This has a pronounced hump at ages
25-39 years.
• After formal school, most individuals at that age bracket are in wage or mixed employment.
• Demand for durable goods and food is also likely to be high.
14
Figure 5: Private other consumption expenditure
Adjusted Per Capita Private Other Consumption (Kenya, 1994)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80Age
Keny
a Sh
illin
gs
15
Total Private consumption profile
• Private consumption between ages 10-23 is driven by private education and other consumption.
• After age 23, the total private consumption consists of private health and other consumption, as private education expenditure ceases.
• Kenya private per capita consumption < Nigeria
16
Figure 6: Total private consumption profile
Per Capita Private Consumption, Kenya, 1994
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
0 10 20 30 40 50 60 70 80
Age
Ksh
illin
gs
Other
HealthEducation
Private Consumption
17
Figure 7: Private consumption Kenya and Nigeria
Components of Private Consumption in Health and Education
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0 10 20 30 40 50 60 70 80 90+
Age in years
Nor
mal
ised
to a
vera
ge la
bour
inco
me
ages
30-
49
Kenya, Educ (Private) Kenya, Health (Private) Nigeria, Educ (Private) Nigeria, Health (Private)
18
Figure 8: Total consumption Kenya and Nigeria
Total Consumption, Kenya and Nigeria
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0 10 20 30 40 50 60 70 80 90+
Age in years
Nor
mal
ised
to a
vera
ge la
bour
inco
me
ages
30
-49
Kenya Nigeria
19
Total consumption vs labor income profiles
• Compares total labor income and total consumption.
• Difference between the per capita income earned by individuals and their corresponding per capita consumption in 1994, by age.
• Surplus or deficit consumption.
20
Figure 9: Total consumption vs. Labor income, Kenya
Per Capita Consumption and Labor Income, Kenya, 1994
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
0 10 20 30 40 50 60 70 80 90+
Age
Kshillings
Consumption
Labor Income
Private Consumption
21
Life-cycle Deficit Profile
• In Kenya, child dependency ends at around age 23 while old age dependency starts at around age 60.
• The surplus life cycle period is between ages 23 and 60 years.
• LCD peaked at age 40.
22
Figure 10: Life-cycle Deficit, Kenya
LIFECYCLE DEFICIT (Kenya, 1994)
-40000
-30000
-20000
-10000
0
10000
20000
30000
40000
50000
60000
0 10 20 30 40 50 60 70 80
age
Keny
a shi
llings
per capita consumption
labor income
lifecycle deficit
23
Life-cycle deficit…
• The surplus labor income is transferred across individuals through households, governments, and through non government organizations.
24
Figure 11: Life-cycle deficit…
Per Capita Lifecycle Deficit, Kenya, 1994
- 35,000
- 30,000
- 25,000
- 20,000
- 15,000
- 10,000
- 5,000
0
5,000
10,000
15,000
20,000
0 10 20 30 40 50 60 70 80 90+
Age
KS
hillings
25
Figure12: Life cycle deficits, Kenya and Nigeria
Life Cycle Deficit for Nigeria and Kenya
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
0 10 20 30 40 50 60 70 80 90+
Age in years
Nor
mal
ised
to L
abou
r In
com
e ag
es 3
0-49
yea
rs
Kenya Nigeria
26
3. Tax profiles
• The asset income tax profile is pronounced after age 25. • Dip in the asset income tax profile between ages 50 and
57 could be due to asset re-allocation by household heads through the disposal of assets to finance private consumption.
• The consumption tax follows the consumption age profile.
• At early ages (ages 1-20), the government transfers surplus is driven by consumption tax, while at age 20-57, the three taxes determine the size of the transfer surplus.
27
Figure13: Tax profiles, Kenya
Per Capita Tax Profiles (Kenya, 1994)
-6000
-4000
-2000
0
2000
4000
6000
8000
0 10 20 30 40 50 60 70 80
Age
Consumption TaxLabor Income TaxAsset Income TaxTransfers surplus
28
Conclusion and further work
Conclusion• NTA is an essential tool for generating the
information required to design national social protection systems.
• It can show how much the government should spend on health, education and other basic needs at different ages.
• It could guide investments in reproductive health or in institutions that empower an economy to earn demographic dividends.
29
Conclusion…
• Further work
-- Refining of tax profiles
-- Estimation of intra and inter household transfers
-- Asset-based reallocations
-- Constructing NTA using household data from other years (1997, 2005, 1992? 1982?)
30
Thank you.
31