Estimating social transfers in kind from general government

Social transfers in kind (STiK) from general government are equivalent to individual consumption of goods and services transferred from government to households. In order to estimate STiK by governments, we are particularly interested in the portion of government expenditure that is for individual use. This is represented by the value of the expenditures incurred by government units on individual consumption of goods or services provided to households as social transfers in kind.

Data from government finance statistics allows such a split as every detailed expense in government finance statistics is coded by a CCOFOG function and each detailed CCOFOG code, or function, is categorized as an individual service (IS) or collective service (CS). In other words, government expenses in government finance statistics can be re-aggregated by function which displays the purpose the expense serves and whether it is an individual service or collective service.

Since government final consumption expenditure does not fully reconcile with the government finance statistics, shares obtained from the government finance statistics data for the respective CCOFOG categories (health, education, etc) as well as shares for the individual services are used instead of levels. These shares are then applied directly to the government final consumption expenditure level.

IS exist only for specific CCOFOG classifications and is denoted by the "X%" in the table below which lists the main CCOFOG functions at the 3-digit level.

*Not all functions are at the same level of aggregation

Since we are only interested in government outlays included in final expenditure, government finance data is used only for a limited number of expense categories, as well as revenue from the sales of goods and services. This is also in-line with the components used in the estimation of GFCE.

Sales of goods and services are on the revenue side of the Government finance statistics and are not assigned to a CCOFOG category. Hence there is no IS/CS distinction. Since this detail is required for the calculation of STiK, detail components of sales of goods and services are assigned to a CCOFOG function with an IS/CS distinction and is outlined in the appendix. Some categories are broad in description, such recreation and culture facilities, where there is no detail information to identify the portion that is IS/CS. Therefore the IS/CS split from the expense side is used to estimate the IS/CS component. Furthermore, there is no detail component identifiable as health related sales of goods and services, other than incidental sales by nonmarket establishments not elsewhere classified within health boards. This component from health boards is allocated to the health CCOFOG function and the IS/CS split is estimated using the split from the expense side of health CCOFOG.

The IS/CS shares are performed using government finance data from a consolidated provincial territorial basis. There are challenges with the federal data being adequately allocated to the function by province. This is because federal expenses are mostly associated with Ontario due to Ottawa being the capital city and the city assuming most of the federal expenses. This has implications on the CCOFOG perspective however, because these amounts are ultimately distributed to provinces and territories and the ultimate function the expense serves is not mainly in Ontario. Lack of details required to adequately allocate the expenses pose a challenge and so we distribute the federal portion of CCOFOG data provincially and territorially using the provincial distribution of federal GFCE and applying it to the total federal portion of CCOFOG. We obtain the federal portion of CCOFOG by province and add the federal amount to the provincial and territorial amounts to calculate the overall HAFC. The assumption involved with this step of estimating the federal portion of STiK from government is that the federal expenses, on a CCOFOG perspective, follows a similar provincial allocation as the federal government final consumption expenditure. Similarly, the federal portion for sales of goods and services is distributed provincially using the same allocation method as the one on the expense side.

The shares of CCOFOG data are based on government finance statistics which measures data on a fiscal year basis, from April to the end of March the year after. We therefore apply a basic calenderization approach to estimate the annual share based on a calendar year. The annual shares are calculated using the following formula:

Sa(t) = 0.25*Sf(t-1) + 0.75*Sf(t)

Where,
Sf - fiscal-based share
Sa - annual-based share

There is a one year lag in the availability of CCOFOG data and the shares are carried forward for the latest year as a result.

Finally, the shares from Table Main aggregates of Canadian classification of function of government (CCOFOG) are applied to the benchmark total government final consumption expenditure to obtain STiK from government to households.