Descripción del proceso del servicio de certificación

69. The invariance principle mentioned earlier implies that a movement of an activity from

the public to the private sector, or vice versa, should not change our measure of economic performance, unless the switch between public and private provision affects quality of the service or access to it. This is where a purely market-based measure of income meets its limits, and where a measure that corrects for differences in institutional set-up may be

warranted for comparisons over time or across countries. Adjusted household disposable

income and actual final consumption are measures that go some way towards accommodating

the invariance principle, at least where ‘social transfers in kind’ by government are concerned. These measures are computed by adding to household income and to household consumption expenditure the equivalent of the goods and services provided in kind by the government (Box 6).

70. The meaning of adjusted disposable income is best explained by way of an

exampleTable 2: Private and public insurance schemes (2). Assume that a society’s labour income equals 100 and that individuals who are active in the labour market buy private health insurance. They make an annual payment for the insurance equal to 10, which can be decomposed into 8 units of insurance premiums (an actuarial value of a loss of 8) and 2 units of consumption of insurance services. At the same time, persons who are sick receive 8 units as reimbursement of their health expenditures. In this case – let us call it Case A – no taxes are paid and insurance claims and premiums offset each other, so that household disposable income equals 100. Now, assume that the government decides to provide the same amount of health insurance coverage to everyone, funded through a tax of 10 units. Nothing has changed, other than that the government is now collecting the insurance payment and distributing the benefits (Case B). But according to standard national accounts statistics, disposable income has fallen, to 90 currency units. Thus, disposable income here yields a distorted comparison. If one adds in the social transfers in kind that households receive from the government under Case B (8 units corresponding to the reimbursement of health expenditures and 2 units corresponding to the running costs of the insurance), the adjusted measure of household disposable income indicates equality between the two cases.

71. The above example leaves aside any consideration about which insurance regime operates more cost effectively and about the effects of the profits made by private insurance companies– it was simply assumed that private and public insurance services are equivalent to 2 currency units. In practice, insurance costs between the two schemes are likely to differ, although it is difficult to establish a general pattern. If the insurance services industry is not perfectly competitive (a reasonable assumption in most countries), the transfer of responsibility from the private to the public sector will be reflected in decreased profits and decreased insurance prices. Even if this has no consequence on household disposable income if profits are distributed to them in the form of dividends, it can make a difference on the accessibility of the insurance service. It is well known that the possibility to insure against certain types of risks has a positive impact on the well-being of people who are risk adverse.

Table 2: Private and public insurance schemes

72. While the failure to estimate the value of security services provided under the two

schemes causes one set of biases, other biases may arise from the fact that the value of most social transfers in kind (those corresponding to the running costs of the insurance in the example above) is measured by the costs of producing these services. In some countries, in particular in the developing world, the cost of these services may greatly exceed their value to most households, who may receive little or nothing in return. The result is a large overestimation of the level of adjusted household income and consumption. Some of this overestimation can be tackled by using output-based volume measures for health and education services produced by government. It is also likely that different parts of the population benefit differently from social transfers in kind provided by government, which introduces an important distributional aspect.

73. It should also be noted that the neutrality of adjusted disposable income with regard to

the public or private ownership of the service provider does not apply for collective services (e.g., security, environmental expenditures to reduce greenhouse gas emissions). When there is a switch from private to public provision of the service, conventional accounting lowers households' disposable income by the amount of tax payments although they may be better off. This may distort comparisons either over time or across countries.

74. Major items in social transfers in kind are health and education services, subsidized

housing, sport and recreation facilities that are provided to citizens at a low price or for free. In France, general government provides nearly all of these services at a cost of about € 290 billion in 2007. As can be seen from74. Major items in social transfers in kind are health and education services, subsidized housing, sport and recreation facilities that are provided to citizens at a low price or for free. In France, general government provides nearly all of these services at a cost of about € 290 billion in 2007. As can be seen from 8, education and health services account for about one third of total transfers in kind, and housing and recreational and cultural activities (museums, public parks…) account for about 10%. The relative magnitude of these transfers varies significantly between countries.. 8, education and health services account for about one third of total transfers in kind, and housing and recreational and cultural activities (museums, public parks…) account for about 10%. The relative magnitude of these transfers varies significantly between countries..

Private insurance scheme (Case A)

Public insurance scheme (Case B)

Labour income 100 100

Tax 0 - 10

Insurance premiums

(excluding insurance services) - 8 0

Insurance claims + 8 0

Household disposable income 100 90

Social transfers in kind : - reimbursements - running costs of the insurance 0 + 10 + 8 + 2 Adjusted household disposable income 100 100

75. Annex D discusses in more details the questions concerning the treatment of private or public insurance and security functions in national accounts, focusing in particular on different types of insurances (health insurance, retirement insurance based on personal capitalization or following a pay-as-you-go scheme)

76. Measures of disposable household income are routinely compiled by a large majority of

OECD countries. Despite the fact that the System of National Accounts also foresees measurement of adjusted household disposable income, there are gaps in its availability. For example, neither the United States, nor Canada or the United Kingdom regularly release such data. We conclude that giving more prominence to income measures of households, especially indicators of adjusted disposable income and actual individual consumption, are simple and useful ways to enhance the relevance of national accounts statistics to the measurement of material living standards.

Box 6. Two concepts of household consumption and disposable income in national accounts

The System of National Accounts draws a distinction between two concepts of household consumption:

• Final consumption expenditure is simply the expenditure incurred by households on consumption products, plus some imputed expenditure items such as the imputed rents that house owners pay to themselves (see above for a discussion).

• Actual final consumption adds to final consumption expenditure the value of social transfers in kind that households receive from governments. The value of these transfers is essentially measured by the costs that the government incurs to provide them to citizens. National accountants draw a further distinction between ‘social benefits in kind’ and ‘transfers of individual non-market goods and services’. Social benefits in kind correspond, for instance, to pharmaceutical products that are reimbursed by the government. This consumption is recorded in government final consumption expenditure but in household actual final consumption. Transfers of individual non-market goods and services correspond, for instance, to the running costs of schools and hospitals.

Figure 8: Social transfers in kind, France 2007

Source: INSEE. Education 30% Health services 34% Pharmaceuticals 9% Social work 9% Recreational  facilities and  activities 6% Real estate 4% Other 8%

These two concepts of consumption have a direct correspondence in two concepts of household income (disposable income and adjusted disposable income) discussed in the main text. The latter is derived from the former by adding the value of social transfers in kind. Savings can be computed as the difference between disposable income and final consumption expenditure or as the difference between adjusted disposable income and actual final consumption.