household income, demand, and saving: deriving macro data with micro data concepts
DESCRIPTION
Role of Heterodox Microeconomics in Heterodox Economics session at 12th International ConferenceTRANSCRIPT
Household Income, Demand, and Saving: Deriving Macro Data with Micro Data Concepts
Barry Cynamon and Steve Fazzari
Post Keynesian Conference
Kansas City, September, 2014
Acknowledgment
• Co-authored work with Barry Cynamon
• Thanks to the Institute for New Economic Thinking for generous financial support
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
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
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
Key Identity
• Accounting identity maintained before and after adjustments:
Disposable Household Personal FinancialIncome = 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
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 ConstructionSingle-Family Homes
+ 283 - 283
• 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)
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
SO WHAT?
Per Capita Personal Income NIPA (gray) –SCF (blue) –Our Adjusted Measure (red)
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,0001988
1991
1994
1997
2000
2003
2006
2009
Per Capita Personal OutlaysNIPA (gray) –PSID Cooper (blue) –Our Adjusted Measure (red)
$15,000
$17,000
$19,000
$21,000
$23,000
$25,000
$27,000
$29,000
$31,000
$33,000
$35,000
1984-1988 1989-1993 1994-1998 1999-2000 2001-2002 2003-2004 2005-2006 2007-2008 2009-2010
Demand-Disposable Income RatiosNIPA PCE / DPI (black) –Adj. Cons / Adj. DPI (gray) –Adj. HH Demand / Adj. DPI (red)
80%
82%
84%
86%
88%
90%
92%
94%
96%
98%
100%
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
Outlays (with interest) to Disp. Income
80%
85%
90%
95%
100%
105%
110%
115%
120%
194
8
195
1
195
4
195
7
196
0
196
3
196
6
196
9
197
2
197
5
197
8
198
1
198
4
198
7
199
0
199
3
199
6
199
9
200
2
200
5
200
8
201
1
HH Demand to Adj DI NIPA PCE to NIPA DPI
Medical Spending Paid for by OthersRatios to Adjusted GDP
50%
55%
60%
65%
70%
75%1
94
8
195
1
195
4
195
7
196
0
196
3
196
6
196
9
197
2
197
5
197
8
198
1
198
4
198
7
199
0
199
3
199
6
199
9
200
2
200
5
200
8
201
1
NIPA PCE / GDP
(HH demand + non-HH healthcare) / adjusted GDP
HH demand / adjusted GDP
Different Saving Rates
-15%
-10%
-5%
0%
5%
10%
15%
194
8
195
1
195
4
195
7
196
0
196
3
196
6
196
9
197
2
197
5
197
8
198
1
198
4
198
7
199
0
199
3
199
6
199
9
200
2
200
5
200
8
201
1
NIPA saving rate adjusted gross saving rate adjusted financial saving rate