4. Private Reallocations
Introduction
The purpose of this section is to describe concepts and methods used to estimate private age reallocations in the National Transfer Flow Account. The material presented here presumes that the reader has estimated the complete economic lifecycle and is familiar with the public reallocation guidelines. Important additional preparation for the reader would be to read Lee, Lee, and Mason (2008) Mason, Lee, et al. (forthcoming) and to review the private sector lectures available on the NTA website. Several spreadsheets, also available on the NTA website, can be used to assist in the construction of private sector accounts.
The Structure of Private Flows
The Structure of Private Flow Account (Table 4.1) provides a quantitative overview of the private sector and two broad economic mechanisms by which resources can be shifted across age groups in this sector. The first mechanism is private transfers that are mediated by families (or households) and non-profit institutions. Beneficiaries receive Private Transfer Inflows which consist of Inter-household Transfers and Intra-household Transfers. The flow account does not include Capital Transfers, e.g., bequests, dowry, and other large transfers. The flow account is limited to the disposition of current income. Capital transfers are accounted for separately following the approach in National Income Accounts.
Private Transfer Outflows are the counterpart of private transfer inflows and also consist of inter-household and intra-household transfers. Intra-household transfers must always balance. In a closed economy, inter-household transfer inflows and outflows would also balance. If residents are net recipients of transfers from the rest of the world (ROW), their inter-household transfer inflows will exceed their inter-household transfer outflows. If residents are net givers of transfers to ROW their inter-household transfer outflows will exceed their inflows. Net private transfers including transfers to and from the rest of the world (ROW) must always balance, i.e., sum to zero.
The second mechanism by which the private sector reallocates resources is through private asset-based reallocations. Private asset income is an inflow. Private saving is an outflow. Private asset-based reallocations equal private asset income less private saving. Private asset income includes only asset income of residents, while private saving is net saving by residents. It is equal to net private saving in the system of national accounts (SNA).
The Structure of Public Flow Account can be constructed using values available from NIPA or from GFS. This is not the case for the Structure of Private Flow Account, because there are no available aggregate controls for private transfers with the exception of net private transfers to ROW. Private asset-based flows are available from NIPA. The Structure of Private Flow Account is constructed after estimates of private transfers have been constructed and is used to summarize private flows in a manner similar to public flows.
Private Transfers
Click on the link for the detailed exposition of 4.1 Private Transfers
Private Asset-based Reallocations
Click on the link for the detailed exposition of 4.2 Private Asset-Based Reallocations
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