Transcript Chapter X DEFINITIONS OF INCOME

Chapter X
DEFINITIONS OF INCOME
(Conceptual issues, definitions in use
and recommendations)
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X.1 Income as factor rewards and as
source of consumption spending
X.2 Relationship between income and
expenditure
X.3 Individual versus Household Incomes
X.4 Shadow Income and the non-observed
economy
X.5 Various income concepts and
relationships between them –
X.6 Subsidies, preferential tax treatment
and income measurement
X.7 Definitions in use, and
recommendation
X.1 Income as factor rewards and as
source of consumption spending
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Most statistical for agriculture interpret
income as the mix of reward to the fixed
factors of production used in production
(NVA, Entrepreneurial Income etc.)
The Handbook is concerned with the total
and disposable income of the households as
institutional unit, available for consumption
and saving/investment.
As such, income includes more than profit
from agricultural production
X.2 Relationship between income and
expenditure
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Disposable income is “.. the maximum
amount that a household or other unit can
afford to spend on consumption goods or
services during the accounting period without
having to finance its expenditure by reducing
its cash, by disposing of other financial or
non-financial assets or by increasing its
liabilities.” (SNA93 para 8.15).
X.2 SNA approach to disposable
income
Main items
 Income from self employment (agric+ other)
 Imputed rental value of owned dwellings
 Wages and salaries
 Income from property (rents, interest etc.)
 Social benefits
 Other current transfers
 Taxation and social contributions (-ve)
 Other current (-ve) transfers
 Social benefits in kind
X.3 Individual versus Household
Incomes
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Income measurement often on basis of
individuals within the household
Policies need to know how this income is
shared in the household
Intra-household transfers particularly
significant in LDCs
What determines household utility?
X.4 Shadow Income and the nonobserved economy
X.5 Various income concepts and
relationships between them
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X.5.1
Extended and Full Incomes,
X.5.2
Lifetime income and permanent
income hypothesis,
X.5.3
Incomes within accounting
systems – total resources, total income,
disposable income etc.
X.5.4
Importance of time (capital gains
and income?)
X.6 Subsidies, preferential tax
treatment and income measurement
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X.6.1Concept of a subsidy
X.6.2Subsidies within agricultural
income measurement systems
X.6.3Which other subsidies might be
considered?
X.6.4. Capital taxation on transfer of
property
X.6 Subsidies, preferential tax
treatment and income measurement
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Key point – accounting systems and
income indicators do not capture all
subsidies that determine the ability of
household to consume
Example – way that farm real estate is
treated in capital taxation
Recommendation
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The Handbook recommends the simplified
definition of Disposable Income (as shown in
following table) for application to income
measurement of agricultural households
X.7 Definitions in use
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Eurostat’s IAHS statistics (close to SNA93
definition)
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Includes transfers between households sectors
and other sectors, and between agricultural
households and other household sub-sectors)
Canberra Group recommendations
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Full specification and simplified definitions of
disposable income
Avoids most non-cash items (including imputed
income from owned-dwellings)
Not tailored to agricultural usage
Why not take Canberra as it stands?
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Income in kind may be particularly large in
farming, and needs specific treatment (an
amplification rather than an addition)
Imputed value of Owner-dwellings is found to
be significant in some countries, and a
methodology for valuation is often present
(an addition)
Detailed tabulation enables compatibility to
be achieved with Canberra
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Net income from self-employment (money
income and in kind) (agriculture / other)
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Imputed rental value of owned dwellings
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Cash wages and salaries
Rent received (net) (property, land)
Other property income (interest + dividends)
Social transfers received (cash)
Other current inflows (regular)
= Total Income
Current taxes on income and wealth
Non-discretionary social contributions
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= Net Disposable Income
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