Creating a 2000 IES-LFS Database in Stata

PROVIDE Project Technical Paper 2005:1

Figure 14: Transfer payments and receipts as a percentage of total income

—R— Relative transfer
payments

—■— Relative transfer
receipts

The information collected from the IES 2000 is summarised in Table 12. These
totals can be seen as the row and column totals of the inter-household transfers sub-
matrix (matrix T) as shown in Table 13. Cell tij (in the i^th row and j^th column) of matrix
T is calculated as

∑tij.∑tij
t = ''_

^,  ∑∑t,

ij

where i and , denote the rows and columns respectively. It is easy to verify that
summing the above expression over , gives the vector of column (expenditure) totals,
while summing over i gives the vector of row (income) totals. The sum of all the cells is
of course the total value of transfer incomes or payments.

The next step is to calculate the net receipts of each household group. This can be
done by subtracting from matrix T its transpose, thus giving a symmetrical matrix
T^s = t - t' for which t_jj =-t_jj. Although one would expect to see all the positive
entries above the diagonal (which implies that a richer household group transfers more
money to poorer households than it receives from them) there are some household
groups that have positive entries below the diagonal. Fortunately this only occurs at the
higher end of the income distribution.⁴⁶ All diagonal entries of the net transfers matrix
are zero (tij = 0 for i = ,). The negative entries of net transfers are deleted, thus giving
the final inter-household transfers matrix in Table 14. Note that the net transfers column

⁴⁶ See t9,7, t9,8 and t10,8.

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