Taxes and benefits

Research articles · Apr 30, 2017

Inequality and household size: A microsimulation for Uruguay

Veronica Amarante

Organismos Internacionales / Comisión Económica para América Latina y el Caribe, Uruguay

Volume 10(1) Spring 2017

Cite as: V. Amarante; 2017; Inequality and household size: A microsimulation for Uruguay; International Journal of Microsimulation; 10(1); 73–105. doi: 10.34196/ijm.00150

Abstract

Declines in fertility and consequently in household size are among the main demographic changes that took place in many Latin American countries during the last decades. This demographic alteration may have had an impact on income distribution in case the patterns of decline were not similar between rich and poor households. In order to understand the driving forces of inequality changes in Uruguay, we consider the role of differential changes in reproductive behaviour and household formation on inequality and also on poverty, for two time periods (1996–2007 and 2007–2013). We estimate the effects of changes in the number of children in the household on mean income and specially, on the distribution of income and on poverty. Based on microsimulation techniques, our results indicate that both poverty and inequality would have been lower if changes in household size had not taken place among Uruguayan households. This ultimately implies that changes in fertility have contributed to higher levels of poverty and inequality, although the size of the total effect is not large. These results are mainly driven by a direct channel dominated by the evolution of the parameters that govern decisions about number of children in the household. Indirect effects, through the labour market, operated in a countervailing manner but due to their smaller magnitude, they were offset by the direct effect.

This article contains 4 figures and 11 tables.

Figures

Figure 1. Household income and inequality.
Figure 2. Poverty incidence. Uruguay. 1996–2013.
Figure A.1. Gini index and total fertility index in Latin America.
Figure A.2. Total fertility index in Latin America.

Tables

Table 1. Number of children per household. Household head younger than 50.
Number of children per household Change
Education (hh head) 1996 2007 2013 1996–2007 2007–2013 1996–2013
Primary or less 1.97 2.03 1.85 3.0% −8.9% −6.2%
Secondary 1.55 1.44 1.41 −7.4% −2.3% −9.5%
Technical 1.76 1.41 1.21 −19.9% −14.3% −31.3%
Teachers 1.32 0.98 1.01 −25.5% 2.7% −23.4%
Tertiary 1.26 0.90 0.83 −28.4% −7.4% −33.6%
Total 1.66 1.46 1.32 −12.0% −9.8% −20.7%

Source: Own calculations based on household surveys.

Table 2. Change in the number of children per household. Household head younger than 50.
1996 2007 2013 1996–2007 2007–2013 1996–2013
Deciles 1–5 2.23 2.11 1.91 −5% −10% −15%
Deciles 6–10 1.09 0.82 0.73 −25% −11% −33%
Total 1.66 1.46 1.32 −12% −10% −20%

Source: Own calculations based on household surveys.

Note: Deciles are calculated on the basis of per capita household income.

Table 3. Estimation of fertility equations. Dependent variable: number of children in the household. Biparental households. 1996, 2007 and 2013.
1996 2007 2013
OLS Poisson Neg. binomial OLS Poisson OLS Poisson Neg. binomial
Medium ed. Hh −0.217
(0.0435)***
−0.116
(0.0251)***
−0.116
(0.0251)***
−0.404
(0.00632)***
−0.223
(0.0036)***
−0.301
(0.00562)***
−0.177
(0.00399)***
−0.145
(0.0097)***
High educ hh −0.242
(0.0672)***
−0.140
(0.0412)***
−0.140
(0.0412)***
−0.534
(0.00915)***
−0.324
(0.0624)***
−0.535
(0.00744)***
−0.365
(0.00580)***
−0.193
(0.00578)***
Med. educ. sp. −0.208
(0.0446)***
−0.109
(0.0255)***
−0.109
(0.0255)***
−0.38
(0.00653)***
−0.205
(0.00396)***
−0.287
(0.00574)***
−0.167
(0.00406)***
−0.135
(0.00403)***
High educ sp. −0.463
(0.0636)***
−0.260
(0.0393)***
−0.260
(0.0393)***
−0.653
(0.00866)***
−0.405
(0.00581)***
−0.495
(0.0037)***
−0.326
(0.00564)***
−0.188
(0.00563)***
Age hh 0.306
(0.0261)***
0.150
(0.0192)***
0.150
(0.0192)***
0.189
(0.00340)***
0.122
(0.00257)***
0.183
(0.00273)***
0.144
(0.00237)***
0.073
(0.00230)***
Age2 hh −0.004
(3.47e-4)***
−0.002
(2.53e-4)***
−0.002
(2.53e-4)***
−0.0025
(4.58e-5)***
−0.0016
(3.45e-5)***
−0.002
(3.70e-5)***
−0.002
(3.20e-5)***
−0.001
(3.10e-5)***
Age spouse 0.176
(0.0154)***
0.198
(0.0145)**
0.198
(0.0145)***
0.19
(0.0225)***
0.169
(.00193)***
0.144
(0.00189)***
0.117
(0.00172)***
0.048
(0.00168)***
Age2 spouse −0.003
(1.95e-4)***
−0.003
(1.97e-4)***
−0.003
(1.97e-4)***
−0.0026
(2.9e-5)***
−0.0024
(2.6e-5)***
−0.002
(2.42e-5)***
−0.002
(2.26e-5)***
−0.001
(2.21e-5)***
Region −0.162
(0.0369)***
−0.087
(0.0219)***
−0.087
(0.0219)***
−0.148
(0.00502)***
−0.0898
(0.00334)***
−0.065
(0.00414)***
−0.046
(0.00321)***
−0.011
(0.00318)***
Sex of hh −0.110
(0.107)
−0.102
(0.071)
−0.102
(0.15)
−0.095
(0.00777)***
−0.069
(0.00544)***
−0.013
(0.00504)**
−0.007
(0.00396)*
0.023
(0.00402)***
Non lab inc hh 0.011
(0.00200)***
0.006
(0.00115)***
0.006
(0.00115)***
0.0008
(0.000250)***
0.0003
(0.000166)
−0.021
(0.000467)***
−0.012
(0.000315)***
−0.008
(0.000322)***
Non lab inc sp 0.010
(2.33e-3)***
0.005
(1.35e-3)***
0.005
(1.35e-3)***
0.003
(0.0002)***
0.0021
(0.00015)***
− (-) − (-) − (-)
Constant −6.089
(0.424)***
−5.232
(0.314)***
−5.232
(0.314)***
−4.329
(0.0553)***
−4.242
(0.0433)***
−3.679
(0.0439)***
−3.908
(0.0400)***
−1.288
(0.0384)***
Observations 5,011 5,011 5,011 249,790 249,790 289,302 289,302 226,850

Standard errors in parentheses.

Significant at 10%;

significant at 5%;

significant at 1%.

Source: Own estimations based on household survey.

Table 4. Labour supply. Dependent variable: hours of work. Tobit estimation.
Household heads Spouses
1996 2007 2013 1996 2007 2013
Sex 7.31
(0.957)***
16.92
(0.0742)***
14.80
(0.0587)***
22.45
(2.829)***
25.22
(0.201)***
19.87
(0.111)***
Age 1.74
(0.322)***
1.66
(0.0397)***
2.21
(0.0335)***
4.71
(0.464)***
4.44
(0.0562)***
3.23
(0.0407)***
Age −0.02 squared (0.0044)*** −0.02
(0.00054)***
−0.03
(0.00046)***
−0.06
(0.0063)***
−0.06
(0.00075)***
−0.04
(0.00054)***
Region 0.68
(0.527)
−0.49
(0.0663)***
−1.02
(0.0578)***
4.03
(1.054)***
2.40
(0.127)***
1.10
(0.0941)***
Children −0.07
(0.196)
−1.22
(0.0247)***
−0.97
(0.0237)***
−3.72
(0.405)***
−4.56
(0.0517)***
−3.75
(0.0416)***
School −10.83
(1.520)***
−7.33
(0.148)***
−3.48
(0.116)***
−4.36
(2.635)*
−6.28
(0.263)***
−4.75
(0.185)***
Med. educ. 4.21
(0.586)***
5.29
(0.0801)***
5.72
(0.0762)***
14.71
(1.256)***
11.42
(0.169)***
8.02
(0.134)***
High edu. 6.71
(0.820)***
7.79
(0.108)***
6.89
(0.0952)***
29.21
(1.659)***
21.15
(0.214)***
14.52
(0.162)***
Married 3.77
(0.899)***
1.51
(0.0701)***
0.56
(0.0626)***
29.50
(19.16)
−0.79
(0.141)***
−0.95
(0.101)***
Non lab inc. −0.39 -0.39
(0.0306)***
0.36
(0.00375)***
0.33
(0.00559)***
Income of hh. −3.86
(0.731)***
−1.57
(0.0754)***
−0.60
(0.0628)***
Constant −3.17
(5.693)
−5.21
(0.696)***
−17.00
(0.585)***
−85.33
(21.34)***
−57.53
(1.13)***
−37.34
(0.905)***
Observat-ions 7,648 405,657 463,118 5,448 258,113 285,446

Standard errors in parentheses.

Significant at 10%.

significant at 5%.

significant at 1%.

Source: Own estimations based on household surveys.

Table 5. Wage equation estimation with selection correction (Heckman maximum likelihood). Dependent variable: hourly wages. Household heads.
1996 2007 2013
Hourly wages Selec. eq. Hourly wages Selec. eq. Hourly wages Selec. eq.
Sex 0.191
(0.031)***
0.155
(0.072)**
0.126
(0.0034)***
0.939
(0.0066)***
0.098
(0.0023)***
0.881
(0.0059)***
Age 0.068
(0.010)***
0.090
(0.024)***
0.021
(0.0015)***
0.139
(0.0035)***
0.032
(0.0013)***
0.154
(0.0029)***
Age sq. −0.0008
(1.4e-4)***
−0.0012
(3.3e-4)***
0.0000
(2.1e-5)**
−0.0018
(4.8e-5)***
−0.0003
(1.8e-5)***
−0.0020
(4.1e-05)***
Region 0.299
(0.017)***
0.005
(0.042)
0.146
(0.0025)***
0.045
(0.0065)***
0.062
(0.0022)***
−0.092
(0.0056)***
Med. educ. 0.338
(0.019)***
0.275
(0.045)***
0.385
(0.0031)***
0.333
(0.0071)***
0.244
(0.0029)***
0.388
(0.0066)***
High educ. 0.860
(0.026)***
0.611
(0.072)***
1.097
(0.0040)***
0.786
(0.012)***
0.778
(0.0034)***
0.761
(0.0092)***
Married 0.073
(0.028)***
0.078
(0.069)
0.121
(0.0026)***
0.065
(0.0069)***
0.161
(0.0023)***
−0.044
(0.0063)***
Children −0.022
(0.015)
−0.096
(0.0022)***
−0.058
(0.0020)***
School −0.471
(0.11)***
−0.590
(0.013)***
−0.255
(0.010)***
Non lab. inc. −0.031
(0.0022)***
0.013
(0.00035)***
0.016
(0.00047)***
Constant 3.44
(0.19)***
−0.88
(0.42)**
3.91
(0.028)***
−1.92
(0.060)***
4.52
(0.023)***
−2.27
(0.050)***
Observations 7,500 7,500 397,207 397,207 459,519 459,519

Standard errors in parentheses.

Significant at 10%.

significant at 5%.

significant at 1%.

Source: Own estimations based on household surveys.

Table 6. Wage equation estimation with selection correction (Heckman maximum likelihood). Dependent variable: hourly wages. Spouses.
1996 2007 2013
Hourly wages Selec. eq. Hourly wages Selec. eq. Hourly wages Selec. eq.
Sex 0.258
(0.068)***
0.660
(0.12)***
0.106
(0.013)***
1.218
(0.012)***
0.028
(0.0032)***
1.051
(0.0087)***
Age 0.076
(0.013)***
0.161
(0.016)***
0.056
(0.0026)***
0.183
(0.0023)***
0.026
(0.0013)***
0.089
(0.0022)***
Age sq. −0.0009
(1.7e-4)***
−0.0020
(2.1e-4)***
−0.0006
(3.3e-5)***
−0.0023
(3.1e-5)***
−0.0002
(1.7e-5)***
−0.0012
(2.9e-5)***
Region 0.390
(0.027)***
0.182
(0.037)***
0.183
(0.0040)***
0.106
(0.0056)***
0.102
(0.0029)***
−0.004
(0.0055)
Med. educ. 0.449
(0.037)***
0.447
(0.043)***
0.357
(0.0081)***
0.406
(0.0074)***
0.186
(0.0042)***
0.083
(0.0071)***
High educ. 1.180
(0.053)***
1.309
(0.065)***
1.121
(0.015)***
1.105
(0.011)***
0.670
(0.0048)***
0.256
(0.0099)***
Married −0.496
(0.50)
0.613
(0.63)
0.110
(0.0043)***
0.005
(0.0065)
0.127
(0.0031)***
−0.181
(0.0060)***
Children −0.110
(0.014)***
−0.169
(0.0023)***
−0.083
(0.0022)***
School −0.228
(0.098)**
−0.276
(0.013)***
−0.250
(0.010)***
Income hh −0.208
(0.026)***
−0.098
(0.0061)***
0.811
(0.0044)***
Constant 3.38
(0.57)***
−2.14
(0.71)***
3.19
(0.067)***
−2.43
(0.060)***
4.69
(0.023)***
−9.35
(0.055)***
Observations 5,486 5,486 256,300 256,300 308,271 308,271

Standard errors in parentheses.

Significant at 10%.

significant at 5%.

significant at 1%.

Source: Own estimations based on household surveys.

Table 7. Number of children per type of household. 1996, 2007 and simulations for 2007 and 2013.
1996–2007 1996 2007 Fertility size effect (FSE) Change due to FSE
Lone parents 1.08 1.02 0.93 −8.4%
Biparental 1.81 1.60 1.68 4.7%
Other 1.63 1.67 1.46 −12.4%
Total 1.66 1.46 1.46 −0.2%
2007–2013 2007 2013 Fertility size effect (FSE) Change due to FSE
Lone parents 1.02 0.90 0.89 −1.3%
Biparental 1.60 1.46 1.45 −0.3%
Other 1.67 1.45 1.48 2.1%
Total 1.46 1.32 1.32 −0.2%

Source: Own estimations based on household surveys.

Table 8. Main results from the microsimulations.
1996–2007 1996 2007 Fertility size effect Hours size effect Hours parameter effect
Mean income 8,381 7,641 7,645 7,597 7,335
Poverty incidence 17.0 29.8 26.7 30.3 31.6
Extreme poverty incidence 1.7 2.6 1.3 3.2 3.3
Theil index 32.4 38.7 36.1 39.1 39.4
Gini coefficient 42.6 45.7 43.7 45.9 45.9
2007–2013 2007 2013 Fertility size effect Hours size effect Hours parameter effect
Mean income 7,641 10,370 10,373 10,294 8,191
Poverty incidence 29.8 12.0 10.0 13.2 10.5
Extreme poverty incidence 2.6 0.5 0.3 0.7 0.7
Theil index 38.7 25.8 24.6 26.4 25.1
Gini coefficient 45.7 38.3 37.1 38.8 38.1

Source: Own estimations based on household surveys.

Table 9. Impact of fertility changes on income, poverty and inequality.1996–2007, 2007–2014.
Observed change Fertility direct effect Hours direct effect Hour Parameter effect Total effect
1996–2007
Mean income −740 3 −45 −306 −348
Poverty 12.8 −3.1 0.5 1.8 −0.8
Extreme poverty 1.0 −1.3 0.6 0.7 −0.1
Theil 6.2 −2.6 0.4 0.7 −1.5
Gini coefficient 3.1 −2.0 0.2 0.2 −1.6
2007–2013
Mean income 2,728 4 −75 −2,179 −2,250
Poverty −17.8 −2.1 1.2 −1.5 −2.3
Extreme poverty −2.1 −0.3 0.2 0.1 0.0
Theil −12.8 −1.2 0.6 −0.7 −1.3
Gini coefficient −7.4 −1.2 0.5 −0.2 −1.0

Source: Own estimations based on household surveys.

Table A.1. Estimation of fertility equations. Dependent variable: number of children in the household. Lone parent households.1996, 2007 and 2013.
1996 2007 2013
OLS Poisson Neg. bin OLS Poisson Neg. bin OLS Poisson Neg. bin
Education
Medium hh 0.220
(0.156)
0.564
(0.217)***
0.558
(0.223)**
−0.065
(0.0153)***
−0.228
(0.0274)***
−0.228
(0.0277)***
−0.047
(0.0132)***
−0.176
(0.0274)***
−0.176
(0.0274)***
High hh 0.003
(0.191)
−0.037
(0.315)
−0.037
(0.321)
−0.201
(0.0184)***
−1.419
(0.0518)***
−1.420
(0.0520)***
−0.167
(0.0157)***
−1.333
(0.0476)***
−1.333
(0.0476)***
Medium whh −0.698
(0.184)***
−0.870
(0.227)***
−0.865
(0.235)***
−0.673
(0.0185)***
−0.186
(0.0283)***
−0.185
(0.0287)***
−0.519
(0.0166)***
−0.147
(0.0284)***
−0.147
(0.0284)***
High whh −0.750
(0.223)***
−0.507
(0.327)
−0.508
(0.335)
−1.127
(0.0219)***
0.415
(0.0528)***
0.416
(0.0531)***
−1.092
(0.0193)***
0.352
(0.0487)***
0.352
(0.0487)***
Age
Age hh 0.083
(0.064)
0.482
(0.143)***
0.478
(0.145)***
0.014
(0.0066)**
0.334
(0.0207)***
0.330
(0.0208)***
0.000
(0.0052)
0.281
(0.0194)***
0.281
(0.0194)***
Age2 hh −0.001
(9e-4)
−0.006
(0.0018)***
−0.006
(1.9e-3)***
0.000
(9.1e-5)
−0.004
(2.7e-4)***
−0.004
(2.7e-4)***
0.000
(7.3e-5)**
−0.003
(2.5e-4)***
−0.003
(2.5e-4)***
Age whh 0.330
(0.079)***
−0.125
(0.149)
−0.124
(0.152)
0.359
(0.0083)***
−0.026
(0.0213)
−0.021
(0.0214)
0.374
(0.0069)***
0.038
(0.0200)*
0.038
(0.0200)*
Age2 whh −0.005
(1e-3)***
0.001
(0.0019)
0.001
(0.002)
−0.005
(1.2e-4)***
−0.001
(2.8e-4)***
−0.001
(2.8e-4)***
−0.005
(9.5e-5)***
−0.002
(2.9e-4)***
−0.002
(2.9e-4)***
Region
Region −0.123
(0.144)
−0.332
(0.195)*
−0.335
(0.202)*
−0.010
(0.0127)
−0.074
(0.0257)***
−0.073
(0.0259)***
−0.008
(0.0102)
−0.059
(0.0245)**
−0.059
(0.0245)**
Region whh −0.124
(0.167)
0.171
(0.205)
0.179
(0.213)
−0.344
(0.0153)***
−0.174
(0.0265)***
−0.176
(0.0269)***
−0.060
(0.0128)***
0.009
(0.0254)
0.009
(0.0254)
Sex
Sex of hh −3.594
(1.370)***
5.442
(2.826)*
5.409
(2.878)*
−3.825
(0.145)***
4.192
(0.403)***
4.106
(0.405)***
−4.283
(0.121)***
3.475
(0.381)***
3.475
(0.381)***
Non-labour
Inc. hh 0.011
(6e-3)*
0.026
(8.3e-3)***
0.026
(8.6e-3)***
0.003
(5.8e-4)***
0.016
(0.00125)***
0.016
(0.0013)***
0.003
(5.5e-4)***
0.020
(1.5e-3)***
0.020
(1.5e-3)***
Inc. whh 0.014
(7e-3)*
−0.006
(0.0088)
−0.006
(9.2e-3)
0.030
(7.6e-4)***
0.015
(0.00135)***
0.015
(0.0014)***
−0.003
(7.8e-4)***
−0.019
(1.5e-3)***
−0.019
(1.5e-3)***
Constant −1.363
(1.083)
−10.880
(2.713)***
−10.820
(2.753)***
−0.163
(0.115)
−8.690
(0.394)***
−8.616
(0.395)***
0.030
(0.0909)
−8.195
(0.371)***
−8.195
(0.371)***
Observations 1,205 1,205 1,205 102,096 102,096 102,096 114,463 114,463 114,463

Standard errors in parentheses.

Significant at 10%.

significant at 5%.

significant at 1%.

Source: Own estimations based on household surveys.

Table A.2. Estimation of fertility equations. Dependent variable: number of children in the household. Other households. 1996, 2007 and 2013.
1996 2007 2013
OLS Poisson Neg. Bin. OLS Poisson Neg. Bin. OLS Poisson Neg. Bin.
Med. educ hh −0.379
(0.082)***
−0.225
(0.046)***
−0.229
(0.049)***
−0.637
(0.016)***
−0.323
(0.0074)***
−0.332
(0.0086)***
−0.679
(0.015)***
−0.353
(0.0075)***
−0.363
(0.0091)***
High educ hh −0.717
(0.12)***
−0.572
(0.083)***
−0.584
(0.086)***
−1.325
(0.021)***
−1.126
(0.015)***
−1.152
(0.016)***
−1.477
(0.019)***
−1.434
(0.015)***
−1.447
(0.017)***
Med. educ. spouse −0.251
(0.10)**
−0.083
(0.053)
−0.082
(0.056)
−0.494
(0.022)***
−0.138
(0.0093)***
−0.131
(0.011)***
−0.437
(0.021)***
−0.124
(0.0097)***
−0.129
(0.012)***
High educ. spouse −0.332
(0.16)**
−0.079
(0.088)
−0.073
(0.093)
−0.782
(0.031)***
−0.209
(0.016)***
−0.185
(0.019)***
−0.524
(0.031)***
−0.062
(0.018)***
−0.043
(0.021)**
Age hh 0.128
(0.041)***
0.095
(0.027)***
0.093
(0.028)***
0.167
(7.2e-3)***
0.152
(4.4 e-3)***
0.147
(4.9e-3)***
0.145
(6e-3)***
0.123
(0.0041)***
0.120
(0.0047)***
Age2 hh −0.002
(5.7e-4)***
−0.001
(3.7e-4)***
−0.001
(3.9e-4)***
−0.002
(1e-4)***
−0.002
(5.9e-5)***
−0.002
(6.7e-5)***
−0.002
(8.7e-5)***
−0.002
(5.6e-5)***
−0.002
(6.5e-5)***
Age spouse 0.104
(9.5e-3)***
0.069
(0.0058)***
0.070
(0.0061)***
0.093
(1.8e-3)***
0.053
(8.5e-4)***
0.056
(1e-3)***
0.089
(1.6e-3)***
0.055
(8.4e-4)***
0.059
(0.0010)***
Age2 spouse −0.002
(2e-4)***
−0.001
(1.2e-4)***
−0.001
(1.3e-4)***
−0.001
(3.4e-5)***
−0.001
(1.7e-5)***
−0.001
(2e-5)***
−0.001
(3.2e-5)***
−0.001
(1.8e-5)***
−0.001
(2.1e-5)***
Region −0.283
(0.074)***
−0.178
(0.042)***
−0.182
(0.044)***
−0.176
(0.014)***
−0.120
(0.0069)***
−0.141
(0.008)***
−0.257
(0.012)***
−0.186
(0.0067)***
−0.198
(0.0083)***
Sex of hh 0.525
(0.11)***
0.433
(0.071)***
0.455
(0.076)***
0.643
(0.015)***
0.445
(0.0082)***
0.506
(0.010)***
0.655
(0.012)***
0.505
(0.0074)***
0.564
(0.0091)***
Non labour inc. hh 0.012
(3.8e-3)***
0.008
(0.0022)***
0.008
(0.0023)***
0.009
(6.6e-4)***
0.006
(3.5e-4)***
0.006
(4.1e-4)***
−0.042
(1.5e-3)***
−0.026
(7.7e-4)***
−0.028
(9.9e-4)***
Non labour inc. sp. 0.013
(0.0058)**
0.005
(0.0029)*
0.006
(0.0031)*
0.008
(8.9e-4)***
0.004
(0.0004)***
0.004
(4.9e-4)***
(-) (-) (-)
Constant −0.870
(0.700)
−1.653
(0.48)***
−1.625
(0.50)***
−1.421
(0.13)***
−2.561
(0.079)***
−2.522
(0.088)***
−0.616
(0.106)***
−1.812
(0.072)***
−1.819
(0.082)***
Observations 1,431 1,431 1,431 53,661 53,661 53,661 59,329 59,329 59,329

Standard errors in parentheses.

Significant at 10%.

significant at 5%.

significant at 1%.

Source: Own estimations based on household surveys.