NTA and private transfers: Methodological issues and evidence from France

1. NTA and private transfers:Methodological issues and evidence from France F.C. Wolff (University of Nantes) January 2006, NTA meeting

2. NTA in France and public transfers • information on public transfers collected by Stefan Zuber • education and old-age support, from 1850 till 2100 • estimates of net present values for various cohorts • replication of the paper of Bommier et alii (2005 NBER WP n° 10969) • Zuber S., Bommier A., Bourdieu J., Suwa-Eisemann A., 2005, ‘Le développement des transferts publics d’éducation et d’assurance-vieillesse par génération en France: 1850-2000’

3. NTA in France and public transfers - results

4. NTA in France and public transfers - results

5. Curent work on private transfers • Measurement issues • Consequences of private transfers (interplay between labor supply and transfers, consequences on housing) • Studies not specifically related to the NTA project: • Survey on altruism versus exchange (Handbook) • Transfers and recipient’s effort (J of Population Eco) • Effects of income on the pattern of home-sharing (REHO) • Current work on grandchild care • Transfers on migrants living in France

6. On the measurement of private transfers • NTA definition “ aggregate measures of resource flows from members of one age group to another for a prescribed accounting period (say a year)” It matters to account for private transfers as they are very important! • Use of NTA to study determinants of transfers (altruism versus exchange models) Lee and Mason (2004, Research plan) • increase in economic growth should lead to an increase in net transfers from children to parents • test of the crowding-out hypothesis (interplay between private and public transfers) • test of the pay-back hypothesis: cohorts investing more in the education of their children should receive greater old-age transfers

7. Measuring private transfers • Identification of private transfers • Family versus non-family • Financial versus time/in-kind • Interhousehold versus intrahousehold

8. Non-family transfers • Financial transfers • Charitable contributions • Transfers to relatives • Time transfers / volunteer work • Are these transfers important, or can we assume that they are negligible ? In the US, contributions for welfare are about 0.25% of GDP

9. Family transfers • Financial transfers • Bequests / Donations • Cash gifts • Loans with preferential interest rate • Time transfers • Care to elderly parents • Education time to children • Grandchild care • Home-sharing

10. Comments on family transfers • Difficulty to make a distinction between bequests, donations, gifts: • Bequests and donations are mainly related to wealth transfers • Can we really make a distinction between capital transfers and others ? For instance, what about a cash gift which allows to improve current housing ? • A given transfer may be either an inter-household or intra-household transfer, depending on the repicient • Example of care to elderly parents: intrahousehold if the elderly lives with children, interhousehold transfer otherwise • Information mainly on cash transfers in the surveys • this is a real problem since public transfers are essentially cash transfers, • there may exist some substitution at the family level between cash and time/in-kind transfers

11. Data • Various sources of data on private transfers • Main sourceSurvey Budget des Familles (Consumption and expenditures)78-79 ; 84-85 ; 88-89 ; 94-95 ; 2001 • Other more specific dataTime Use survey 1999 (also 1982)Education survey 2003 (also 1992)Associational participation and volunteer work survey 2002Actifs Financiers 1986, 1992, 1998Passage of Migrants to Retirement 2002 • No clear historical depth …

12. Question 1.Are non-family transfers important? • L. Prouteau, F.C. Wolff (2005)‘An attempt at a quantification and valuation of volunteer work’, Economie et Statistique • Associational participation and volunteer work survey 2002 (about 5,800 households) • Information on charitable cash contributions • Mean age of donors 51.42 years • About 8.5 billions of francs (recall that 6.55 francs = 1 euro)

13. Age profile - cash transfers outflows

14. Volunteer work • Mean number of hours : about 2.5 hours per week • About 13 millions of volunteer workers in France • Mainly irregular volunteer work: less than 1h per week for 66% of volunteer workers • But 11% of volunteer workers spend more than 6 hours • Equivalent of 817000 full-time jobs • Regular volunteer workers: 635 000 full-time jobs • Irregular volunteer workers: 182 000 full-time jobs

15. Volunteer work • Two main methods of evaluation (input related method) (1) Opportunity cost (using the cost of time for workers, i.e. imputed wage) (2) Replacement cost method : how it costs for associations to obtain the same services • Use of these different methods, with several variants • We choose to rely on the replacement cost method (the more appropriate in the context of volunteer work)

16. Volunteer work • Mean age of volunteer workers: 45.96 years • Value of charitable time contributions: 104.9 billions of francs • Ratio time transfers / cash transfers: More than 12 ! • Volunteer work = about 1% of GDP !

17. Age profile - time transfers outflows

18. Age profiles – time versus money

19. Question 2.Do educational time transfers matter ? • Use of the BDF 2001 survey – information on educational expenditures • Construction of age profiles following the method described in Andy Mason’s note (see the website) • Allocation by age group with some simple regressions methods

20. Education cash transfers • Mean age of donor 45.36 years • Mean age of recipient 15.71 years • Total value About 41 billions of francs

21. Age profile – education inflows (cash)

22. Age profile – education outflows (cash)

23. Age profile – education net transfer (cash)

24. Educational time transfers • Use of the INED Education survey 2003 • Measurement of time devoted by parents to the children’s schoolwork • In the questionnaire, we have information on the number of hours per week, which is converted in an annual number of hours • Monetary evaluation : use of the value of the minimal wage for each person (6.83 euros in 2002, then conversion in Francs)

25. Education time transfers • Mean age of donor 39.87 (instead of 45.36 for cash) • Mean age of recipient 11.64 (instead of 15.71 for cash) • Total value About 44.5 billions of francs (instead of 41 billions of francs for cash) Thus, it seems very important to account for time transfers in certain circumstances !!!!!

26. Age profile – education time inflows

27. Age profile – education time outflows

28. Age profile – education net transfer (time)

29. Age profile – education inflows time vs money

30. Age profile – education outflowstime vs money

31. Age profile – education net transfers time vs money

32. Age profile – education net transferstime + money versus money

33. Question 3. Inter versus intrahousehold transfers • Evidence on intergenerational transfers in France • Use of the BDF survey 2001 • Question on regular/irregular cash transfers received during the year of the survey • Exclusion of donations/bequests

34. Intergenerational cash transfers • Transfers received • Mean age of recipient: 39.50 years • Value: 56.3 billions of francs • Transfers given • Mean age of donor: 54.97 years • Value: 63.0 billions of francs • Slight difference between the total amount given and the total amount received

35. Age profile – cash transfers inflows

36. Age profile – cash transfers outflows

37. Age profile – net intergenerational transfers

38. Measurement of intrahousehold transfers • Use of information on : • consumption • labor income • public transfers • Intrahousehold redistribution: intrahousehold transfer = consumption - labor income + public transfers

39. Age profile – total consumption

40. Age profile – labor income

41. Intrahousehold transfers • Mean age of donor 45.40 years • Mean age of recipient 29.59 years • Total value About 1148.4 billions of francs !!!! More than 25 times the value of intergenerational transfers received (excluding bequests and donations)

42. Age profile – Intrahousehold transfers inflows

43. Age profile – Intrahousehold transfers outflows

44. Age profile – net intrahousehold transfers

45. Age profile – net intrahousehold transfers to consumption

46. Comments • Interest of a cross-country comparison: comparison with the results evidenced in Taiwan (Andy Mason, Nicole Mun-Sim Lai, NTA 2005) • Intergenerational transfers : the net flow is positive in Taiwan above 60, while it remains negative in France above 44. The reason is due to public retirement in France, so that private transfers flow downwards. • Intragenerational transfers: again, a very different pattern with respect to Taiwan. In Taiwan, net transfers are positive about 54 in 1998, while in France net transfers remain always negative …

47. Donations and bequests • Difference between « current cash transfers » (financial help, either regular or irregular), mainly related to consumption, and « inheritance transfers » (donations, bequests), related to wealth • Information on bequests and donations received in the Budget des Familles survey • Comparison between financial transfers and ‘wealth transfers’

48. Donations and bequests • Mean age of recipient 46.98 years (instead of 39.50 years for cash gifts) • Value 125.64 billions of francs About twice higher than cash transfers received • So, very important to account for wealth transfers (they are certainly underestimated with a ‘consumption’ survey, not really appropriate)

49. Age profile – bequests inflows

50. Age profile – intergenerational family transfers