Social Security in a "Moral Economy": An Empirical Analysis for Java Author(s): Martin Ravallion and Lorraine Dearden Source:

The Review of Economics and Statistics, Vol. 70, No. 1 (Feb., 1988), pp. 36-44 Published by: The MIT Press Stable URL: http://www.jstor.org/stable/1928148 . Accessed: 03/05/2011 23:45
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SOCIAL SECURITY IN A "MORAL ECONOMY": AN EMPIRICAL ANALYSIS FOR JAVA

MartinRavallionand LorraineDearden*
are modelledas outcomes payments Abstract-Privatetransfer of a constrainedsocial choice problem facing donors. The leveldata set forJava approach is applied to a largehousehold of the the performance are testedconcerning and hypotheses system.Transferbe"moral economy" as a social security betweenruraland urban haviouris foundto be verydifferent and outlaysare incomeinequality receipts areas. Whiletransfer reducingin rural areas, this is not the case in urban areas. being targetedto disadThere is also evidence of'transfers vantaged householdssuch as the sick,elderlyand (for urban areas) theunemployed.

tion of some key parametersof donors' social preferencesfrom econometricmodels of their and outlays.3 receipts transfer in this setting question of interest A further in social preferences concernspossible differences betweenruraland urbanareas. It has been argued that, as developing economies become more urbanized,thereis a declinein the distributional of the of theME. Casual observations significance makesuch betweentheseenvironments differences I. Introduction plausible.For example,neighbourlian argument funded ness and reciprocity LDCs havepublicly to be more LTHOUGH few thought are widely distributional importantin villages than cities. Also, institusimilar social security systems, outcomes may be achievedby a private"moral tionalized social security systemsare sometimes interpersonal more developed in urban areas. With theseargueconomy"(ME) based on voluntary transfers of moneyor goods.' This begs thecentral mentsin mind,we shall testforthe existenceof the significant behaviour betweentransfer question of this paper: Does a ME perform differences In particu- in ruraland urban areas of our sample. of a social security system? functions transfers The following of our lar: Is thereevidencethata ME targets sectiongivesan overview groups,such as econometricmodel of transfer disadvantaged towardsotherwise receiptsand outtreator unemployed? thepoor, sick,elderly III givesa morerigorous lays, while-section The paper examinesthatquestionfortheisland ment of its choice-theoretic basis. SectionIV dein scribes the data and methods of the empirical of Java in Indonesia. Java has been prominent a ME.2 large the despite But, discussions of past Section V discussesthe resultsfor investigation. on this subject,we know surprisingly rural households,while sectionVI discusses the literature littleabout the way the JavaneseME distributes urban results. someconclusions. SectionVII offers incomes. The presentstudymodels the distribuand receiptsamongstrecipients tions of transfer oftheModel II. An Overview donorsin a largehousehold of donationsamongst model of the distrieconometric The following level data set forYogyakartaProvincein central and outlaysis assumed: receipts as the out- butionof transfer are interpreted Java. The distributions social choiceproblemfaccomes of a constrained = a, + fl1log Y1+ Xiyl + Mliif i E R log Tir of description ing potentialdonors.A theoretical = 0 otherwise(1) Tir identificawhichpermits that problem is offered + M2i if i E D logTi' = a2 + /21og yi + Xi2Y2

August26, 1986. Revisionaccepted Received forpublication forpublicationJuly14, 1987. *The AustralianNational University. on thispaper,our thanksgo to For theirhelpfulcomments Jere Behrman, David Bevan, Anne Booth, David Collard, Mubyarto, R. M. Sundrum,Dominique van de Walle, the at Gadja Mada and seminarparticipants Review's referees, Yogyakarta,and the Research School of Pacific University, Studies,A.N.U. 1The term " moraleconomy"appearsto be due to Thompson viewof traditional (1971) who describesit as "... a consistent of thepropereconomicfunctions social normsand obligations, (p. 79). thecommunity" of severalpartieswithin includeGeertz(1963), Scott(1976), 2Important contributions Collier (1981), and Hart (1986).

Tid= 0 otherwise

(2)

of 3There has been some recentworkon the identification of government thedistribution from implicitsocial preferences and taxation(Ahmad and Stern,1984; Behrman expenditure and Sah, 1984) and fromparental allocations of schooling expendituresamongst children(Behrmanet al., 1982). The contriof donor's incomeand taxationon charitable influence David Collard butions has been studiedby MartinFeldstein, and othersfor the United States and United Kingdom; for see Collard (1978, ch. 10). The discussion and references to model both attempt presentpaper appears to be the first framework. receiptsand outlaysin a choice-theoretic transfer Copyright ? 1988

[ 36 ]

SOCIAL SECURITY IN A "MORAL ECONOMY" where,foreach householdi = 1,..., n: = transfer receipts Tir
= transfer outlays Y7= an appropriatemoneymetricof welfare aftertransfers, "income" forshort relevant household charXi = a vectorof other acteristics R = the set of all householdswith positive receipts D = the set of all householdswith positive donations

37

Td

's and y's are parametric and wherethe a 's, P3 and the /i's are independent and normally distributed errorprocesseswithzero mean and constant variance. Two versionsof this model will be considered: one fornet receipts or outlaysand theother forgrossreceipts or outlays. Therewill(generally) be households who both receiveand donate and so R and D may intersect in the model of gross receipts. Of course this is not possible for net receipts.It will be seen laterthatthis distinction has an interesting interpretation. Our basic characterization of thedonor'schoice problem leading to equations(1) and (2) can be summarized as follows. Each donoris assumedto hold a socialpreference ordering, represented by a real valued function defined on theperceived personal welfaresof a fixednumberof individuals including, of course,thedonor.4Personalwelfare is a function of personalattributes only,including income,itselfinfluenced by receiptsand outlays. The latterare chosen by the donor to maximize his or hersocial preference ordering, subjectto the adding up constraint.The donor is also constrained by tax powers; in particular, negative transfers to anyindividual are precluded. We generally take the view here that transfers to donorsinsofar as they influence onlymatter the income distribution. post-transfer Donors may perceive recipients'welfaresto depend on other variablesbesides their incomes.But transfers only enter theirreckoning insofaras theyprovide an

4The mostobvious reasonwhyan individual mayhold social preferences is altruism, and thisis far fromimplausible.But theremaybe otherreasons.In theabsenseof a complete set of risk markets, selfish individuals may considerit in theirlongterm interests to exhibit sympathetic preferences as a risk-sharing arrangement. See Sugden(1986) fordiscussion of how such (self-enforcing) cooperative behaviour can evolve.

instrument for changingrecipients' consumption possibilities.An alternative view is that donors also considerthe satisfaction recipients may gain from becomingdonorsthemselves. This possibility affects some aspects of our interpretation of the model specification, although,with some minor changes,the formal model outlinedin the following sectionis generalenoughto permit bothviews. We shall be particularly concernedwith the parametersf31 and f2 in equations (1) and (2). These can be given simple heuristicinterpretations. Consider, first, equation (1), for transfer receipts.If 81 = 1 thenreceiptsare proportional to income; the averageratioof receipts to income (for i E R) is simplyexp(al + Xiyl) and is independentof income. In thiscase, transfer receipts do not alterthe distribution of incomein thatthe relativeincomes of any two households(withthe same attributes X) do not change.Thus one can inferthatthe donors'chosentransfers do not,on balance, reveal any aversionto inequality.Similarly, values of P, < 1 imply that the ratio of receiptsto incomeincreases as incomefallsand so suggestthat donors are averse to inequality.On the other hand, values of f, > 1 suggest that donors prefer SectionIII demonstrates inequality. how the above interpretation of P, can be derived froma more formalmodel of the donor's social choice problem. Next considerequation(2), fortransfer outlays. The relative generosity of two(otherwise identical) donors presumably sympathetic reflects a difference in theirmarginal utilities of own-income. As income increasesone expectsthe marginal utility of income to fall. And so the utilityloss from greatergenerosity will also fall. One can conjecturethatthe proportion of an incomegain which is passed on in a donor's outlayis a measureof how responsive the donor's marginalutilityof income is to the consequentfall in post-transfer income. Section III demonstrates how 2 can be as the elasticity interpreted of the donor'smargiof own-income. nal utility Two important issues ariseconcerning thedefinitionof an interpersonal transfer: i. Some transfers are reciprocal;for example, suppose thatpersonA givesRpl,000 to personB who gives (possiblyat anotherdate or in kind) a giftto A worth, say,Rp500. The questionarisesas to whetherthis should be treatedas two distinct gross transfers or as one net transfer of Rp500 fromA to B.

38

THE REVIEW OF ECONOMICS AND STATISTICS

It is assumed thatthe values of tdr are chosen are passed on; for example, ii. Some transfers person A gives Rpl,000 to B who givesRp500 to by d to maximize: B has acted as an intermediary in the C. In effect, A to C. Should one think of Rp500 from (3) transfer u(Y15 X15,...,5 Yd5 Xd5 .., Yn 5 Xn) directtransfers of of this situationas comprising transfers of household Rpl,000 (A to B) and Rp500 (B to C) or as a whereY1is theincomeafter of i. The of Rp500 (A to B) and an indirect i and Xi is a vectorof otherattributes directtransfer maximization is constrained by transfer of Rp500 (A to C)? The choice clearlydepends on the assumption Yr= f (tdr 5 Xr) (4) one makes about the initialdonor's expectations n about the recipient'sdonations.If one assumes (5) that donors hold myopic expectationsof their E tdr Yd =Yd r=1 recipient'sbehaviour then only the gross direct transfers should be considered.At the otherexwhere Yd is the donor's (fixed) pre-transfer intreme,if one assumes that donors hold rational The simplestexampleof the function is come. f thenonlynet of recipients' behaviour expectations = Yr + tdr* More generally, one may suppose Yr transfers are relevantand indirecttransfers (via influence that transfers theirrecipients' pre-transin thesame way as third parties)shouldbe treated ferincome,either forexample, positively (through, directones. or to choose between any effectson the recipient'sproductivity) In our view, it is difficult negatively (through, for example, disincentive thesealternative assumptions on a priorigrounds. requirements of the rational effects).Thus aYr/dtdr may be greateror less The informational but it is assumedto be non-negative. expectationsassumptionare considerablebut it than unity, Under these conditions,the donor's optimal For exammay stillbe plausiblein some settings. transfer must have theproperty that it may not be implauvillage, ple, in a traditional sible that donors have the information necessary au au aYr beto correctly anticipate (on average)recipients' aYd atdr aYr suggeststhatdonors haviour. Casual observation For example,in oftentake accountof reciprocity. slackness. (6) and tdr ? 0 withcomplementary to orderto save face,a poor recipient may prefer make a small giftto a richdonorwho expectsthis In otherwords,at an optimum, thedonor'smargiis believedto be a to happen. Such "reciprocity" nal utilityfrom givingan extra Rupiah cannot of village economics in common characteristic exceed the donor's marginal utility of ownSoutheastAsia (Scott,1976,chapter6). theextraRupiahwillbe given income.(Otherwise, ourselves now on thisissue, Ratherthancommit and so the previousstatecould not have been an the theoretical model of the donor'schoice proboptimum.) If the two marginalutilitiescan be lem discussed in the-followingsection can be levelthenit willbe equalized at a positivetransfer in eitherof two ways, statistically implemented (at least locally) optimal to make that transfer.5 to thealternative about assumptions corresponding will be made since the Otherwise no transfer The donors' expectations of recipients' behaviour. utilities wouldrequire the equalizationof marginal transfermade fromdonor d to recipientr is will be made power to tax. Note thatno transfers thisis the denoted tdr.Undermyopic expectations if aYryatdr = 0. Non-altruistic behaviour entails underrationalexpectations gross directtransfer; a u/a Yr< 0 and, of course, no transfer will be withany intermediate transit is the net transfer made in thiscase either. ferssubsumed. In derivingequations(1) and (2) as an econothe metricmodel of thedonors'optimaltransfers, III. The Donors' Social ChoiceProblem a choice-theoretic This sectionoffers interpretaare that forthisto be a globaloptimum 5Sufficientconditions modelsof transfer tionof theeconometric receipts u is strictly quasi-concavein all incomesand f is concave in receipts. transfer and outlaysgivenby equations(1) and (2),

SOCIAL SECURITY IN A "MORAL ECONOMY"

39

the threederivatives Under these assumptions, are assumed: forms explicitfunctional following is CES in the in (6) are function i. Each donor's utility of and the elasticity incomes, vectorof recipients' au acrossdonors. is constant substitution (7) ( > 0) dY = g(Xd)Yd T are separable beii. Donors' utilityfunctions adu and theincomesof others. tweenown-income =h(Xr)Yr (8) (>O) is of own-income iii. Donors' marginalutility withthe same elasticity iso-elasticin own-income, across donors. (9) dt= k ( Xr)Yr/tdr iv. Recipients' incomes are iso-elasticin their with a constantelasticity receipts, total transfer of the donor's marginal Here ST is the elasticity across recipients. and e is the index of the own-income of utility studin similar These are commonassumptions e = 0 can be relative aversion; donor's inequality of substituThe elasticity ies of social preferences. in which case "Benthamite" as the of incomesis a well-known interpreted tion in a CES function as while in others' e ; oo is linear incomes, forequalityamongstthose utility measureof preference in which case the "Rawlsian" only one approaches 1970); Atkinson, in particular, incomes(following, matters. income lowest the to theaversion thehigher the lowerthatelasticity, is zero or, if Recalling (6), the optimaltransfer inequality.The CES formhas been common in is by positive, given see, for redistribution; past studies of voluntary and Behrman and et al. (1982) Behrman example, (10) tdr = g(Xd) -h ( Xr) k(Xr) Yr Yd . the Sah (1984).6 Startingfromthis assumption, when aiming for a Summingthis expression over donors and recipiothers follow quite naturally alloone obtainsthe following model whichis linearin parameters. ents, respectively, receipts: In our view,(iv) is the least appealingof these cation of transfer n assumptionssince it is violatedby the (arguably) for i E R preimportantspecial case in which recipients' E tdi= a h(X1)k(X1)Y1` Tir d=l transfer of their incomesare independent transfer = 0 otherwise (11) the assumpreceipts.Against this disadvantage, thatincome where tion squares easilywiththe argument since the function are productive transfers f can a = g(Xd) Yd as a Cobb-Douglas "producthen be interpreted (Behrmanand Sah, 1984). But we tion function" to: while outlaysare allocatedaccording is difficult to have also foundthattheassumption n in relax withoutabandoningthe model's linearity Td= fori E D ti= b -g(Xj)lY'Y reaanother parametersand this is, presumably, r=1 son forits popularity.7 = O otherwise (12) where
to CES is the generalternative 6A conceptuallyattractive et al. (1982). This embodies used by Behrman alized CES form fromthe originof the contoursof displacement a parametric minimum(" subsisand so characterizes social preference, However,thisrenders welfares. tence") targetsfor recipients' We do nothave a non-linin parameters. our model non-linear whichcan handlethisproblemand the factthat ear estimator is truncated (arisingfromthe our model's errordistribution fact that some householdsdo not make or receivetransfers). formwhich functional CES appears to be the most flexible tractablewith gives us a model which is computationally available estimators. about the production 7Note also that weaker assumptions problemsin process (such as CES) can yield identification fromthe input curvature the social preference distinguishing curvature. substitution

b=

h ( Xr)k ( Xr)Y

modelgiven (1) by equations The econometric and (2) can nowbe obtained bytaking logsof(11) in thevectors ofhousehold and k areexponential to include are taken characteristics Xi. The latter terms distributed error and independent normally
as well as the variables), (embodyingany omitted
= 1 - e; in ric model. In thereceipts equation, I31 the outlaysequation, I2 = 7T.

and (12), assumingthateach of thefunctions h, g

in theeconometincluded characteristics observed

40 IV.

THE REVIEW OF ECONOMICS AND STATISTICS Methods Data and Estimation

particularly numerous educational institutions, Gadja Mada University. Detailed data on household incomes and exA similarmodel to equation (1) has been appendituresfor a large sample are available from of developdistribution plied to the international results of the SUSENAS surveysdone by the ment assistance by Behrman and Sah (1984). (BPS). We IndonesianCentralBureauof Statistics Ordinary least squares estimationwas used by use the data fora sample of 2,261 householdsin Behrmanand Sah on thesampleof aid recipients. in central Java,as contained YogyakartaProvince it can be While this is a convenientestimator, in the 1981 SUSENAS tapes.8These includedata biased estiexpected to produce (asymptotically) all receiptsand outlays,comprising on transfer willbe sampleselectivmateson twocounts:there gifts of money and goods, the lattervalued at ity bias associated with the exclusion of nonmarket pricesby BPS. current bias due to the fact recipientsand simultaneity in Jakarta conOur discussionswithBPS staff that the post-transfer income variable is itselfa had been seriouseffort vincedus thata reasonably functionof transfer receiptsand so will not be includall transfers, made to accuratelyquantify term.'0Our preindependent of themodel'serror ing (for example) food consumed at selametans ferred estimator forthisstudy has been a two-stage providedby richer (communal feasts commonly and nonTobit estimator(with non-recipients households in Javanese villages). The data are indonors included) in which the post-transfer recalland so measurement based on interviewees' come variablewas not used as its own instrument. we see no good although errors are to be expected, The income variable in equations (1) and (2) would not be whitenoise. reason whythoseerrors should be a suitable metricof each household's However, it is plausible that thereare formsof The variablewe have used welfareaftertransfers. transferbehaviour which would not be easily on all goods and is total household expenditure suchas "work survey, picked up in a conventional this as a services,excludinggifts.We interpret workunderemployed sharing"practicesamongst income.To help permanent proxyforpost-transfer ers.9 deal with the simultaneity problemwe have reThe use of thehouseholdas theunitof observaplaced log Y in equations(1) and (2) by predicted tion is forcedon us by the data. This means that values from a regressionof log consumption transfers betweenindividuals we cannot identify set of householdcharacterisagainstthe following between transfers withinone household,although receipts, years of tics: income excludingtransfer membersof the same familylivingin different occupational schooling, dwelling characteristics, householdsare included. dummyvariables and the X vectorin equations Yogyakarta Provinceas a whole turnsout to (1) and (2). (Full details are available fromthe Net receipts of transfers. have been a net recipient as an consumption authors.)The use of predicted of consumption of 2.7% total an average represent had the exinstrument for actual consumption is much in ruralareas. But the figure expenditure on estimates of the, 's, whichwere pected effects higherin urban areas, at about 17% of expendireduced in the receipts equationand increasedin two factors:remitture. This probably reflects the outlays equation when comparedto the estiwho leave the Protances fromfamilymembers as its own inmates obtained usingconsumption thosewho findworkin Jakarta, vince,particularly To the extentthat transfers also affect strument. who come students made to support and transfers incomes,theinclusionof thelatterin pre-transfer fromoutside the Provinceto attendYogyakarta's the predictor consumpequation forpost-transfer
for a 8The choice of Yogyakarta Provincewas attractive numberof reasons.It gave us a sampleof manageableproportions. The firstauthor was also a visitor at Gadja Mada in Yogyakartaand so the area was not unfamiliar. University of The area also appears to providea reasonablecross-section in centralJava as a whole. conditions in Javanese 9Such practices are thoughtto be traditional their appearsto have declined importance although agriculture, discussion see Collier (1981), in recent times. For further (1984) and Hart (1986). Ishikawa (1981), Booth and Sundrum 10Behrmanand Sah (1984) note existenceof the second problem and consider the likely bias in the OLS income in thepresent However,thisis less thansatisfactory coefficient. in equations(1) and (2) will, since all othercoefficients setting is correin general,also be biased when (even one) regressor lated with the error term.Behrmanand Craig (1987) have instrumental variablesestimator provided a more convincing of theirmodel of the spatial allocation of police patrols in Baltimore.

SOCIAL SECURITY IN A "MORAL ECONOMY"

TABLE 1.-ESTIMATES OF EQUATIONS (1) AND

41

(2)

FOR RURAL HOUSEHOLDS

(1) Receipts Gross 1 Income (log) Household size (log) Ill-health (week) Ill-health (quarter) Births Deaths Age Age Age2 Unemployment SEE Prob (T > GIX) Predicted Actual 22 (2.1) - 3.1 (3.0) 0.023(0.023) 2.4 (2.7) 1.9 (2.4) 2.4 (2.3) 1.6 (0.72) 0.048 (0.36) 0.0008 (0.64) 1.1 (0.81) 10 0.34 0.31 Net 38 (3.1) - 5.0 (4.0) 0.86 (0.72) 2.6 (2.4) 2.1 (2.2) 3.7 (2.9) - 1.0 (0.38) 0.034 (0.22) 0.0018 (1.2) 2.0 (1.3) 11 0.25 0.25 Gross -25 (6.2) 2.6 (6.4) -0.30 (0.76) -0.31 (0.82) -0.48 (1.5) 0.20 (0.46) - 2.1 (2.2) 0.13 (2.3) -0.0010 (2.0) - 2.0 (3.5) 4.7 0.85 0.72

(2) Outlays Net -39 (6.6) 3.7 (6.3) -0.40 (0.71) - 1.1 (2.2) -1.2 (2.6) -0.72 (1.2) -0.34 (0.25) -0.20 (2.4) -0.0022 (2.7) -1.7 (2.0) 6.4 0.63 0.54

Note: Absolute t-ratioson normalized coefficients in parentheses.

data on their bias in the esti- nitionsof thevariablesand summary tion will leave some simultaneity are morelikelyto means and standarddeviations. mates. Assumingthattransfers a productive on pre-t-'ans- The followingpoints emergeclearlyfromthe effect have, if anything, resultsof table 1: and f2 fer incomes, P, will be over-estimated exhibitsignificant i. Donors' social preferences The possibilityof such biases under-estimated. utility the aversionto inequalityand elasticmarginal should be borne in mind when interpreting aversion The inequality parameresults.11 of own-income."2 following ter is found to be 4.1 for the model of gross V. The RuralResults receipts (myopic expectations)and 6.0 for net The correspondreceipts(rational expectations). of thecoefficients Table 1 givesTobit estimates of income ing elasticitiesof the marginalutility of equations (1) and (2) forthe 1,539 households are 2.6 and 3.7. in the SUSENAS sample who were classifiedas effects of household size on ii. No significant livingin rural areas of YogyakartaProvince.Rereceiptsor outlaysare revealedforeithermodel. sults are given for both gross and net transfers, effects operOf course,theremay stillbe indirect to the two assumptions concerning corresponding ating throughother variables,most particularly of recipients' behaviourdisdonors' expectations household consumption. (Household size was cussed in sectionII. The appendixgivesfulldefiin the instrument equation for highlysignificant The insignificance of size as a comconsumption.)
"The direction of any bias in othercoefficients is difficult to determineon a priori grounds.We also tried deletingpretransfer income fromthepredictor equationsbut thisresulted in unacceptably low correlations between predicted and actual consumptions. Assets,notably land,wouldprobably have been a betterchoice than incomes,but thisis not includedin the SUSENAS data. "2Any simultaneity bias due to a productive effect of transfers on " pre-transfer" in 81 beingoverestimated incomewillresult Thus our conclusionwill also and f2 being underestimated. hold if suchbiases could be eliminated. However, anydisincentiveeffects of transfers on pre-transfer incomeswould mitigate the conclusion.

42

THE REVIEW OF ECONOMICS AND STATISTICS

d (k = 2). The restriction rejected forall Pk + Yk = 1 is firmly specifications. Note that this also implies rejectionof the (un-tested) restricted form used by Behrman and Sah (1984) in which the log of foreignaid as a proportionof recipient's nationalincomeis regressed againstper-capita income. 14Full details on therestricted regressions are available from the authors. 15Note that the elasticities used here and in laterdiscussion are the totaleffects of changesin theregressor on theexpected

ponent of the X vectorin equations(1) and (2) otherwiseaverage conditions, an extra illness in implies that the relationbetween transfers and the last week increasesnet transfer receiptsby a incomes is not homogeneousin household size; factor of two,representing about an extraRp4,000 for a given ineome per person, an increase in at the mean, or about 10% of mean expenditure."6 household size will lead to lowertransfer receipts A recentbirthwould increasereceipts by a factor per personand higher outlays perperson."3 of 2.5 or about Rp6,000. For an extra year at iii. A numberof otherhouseholdcharacteristicsmean age, net receipts increaseby about 4.0% and affect transfer behaviourin ruralareas. Ill-health net outlaysfallby 1.5%. attracts receiptsand discourages outlays, although only significantly so foroutlaysundertherational VI. An Urban"Moral Economy"? expectationsassumption.A recentbirthattracts We now look at results forthe SUSENAS samreceiptsbut has no significant effect on outlays, ple of 722 households in urban areas (mainly although (exceptforgrossoutlays)there is little to Yogyakarta City) of Yogyakarta Province.The suggestthat deaths have a similareffect. Unemmethodology is the same, so we turnstraight to ployment has no significant effect on receipts, but theresults in table 2. outlays are reduced and by a similar amount The contrast withtheruralestimates is striking. underboth assumptions. The following pointsseemmostnotable: iv. Receipts appear to be invariantto age of i. Neitherreceiptsnor outlaysare significantly household head, whileoutlaysexhibita plausible influencedby income for eitherspecification. A invertedu relationship, withturning pointsat 61 value of P, = 0 implies unitaryinequalityaverand 45 years for gross and net outlays,respecsion. However, P, is not significantly different tively.However,when age2 is dropped fromthe from unity by a likelihood ratio test; so one receipts equations, significant positive relationcannot rejectthenull hypothesis of zeroinequality ships are found, with regression coefficients of aversion. The of value f2 = 0 impliesa constant 0.13 (t = 5.6) and 0.15 (5.5) for gross and net marginalutility of own-income. receipts, respectively.14 Thus transfer receipts sugii. Receipts decreasewithhouseholdsize. This gesttargeting towardtheelderly. resultmay reflect transfers received by singlestuv. The magnitudes of a numberof theseeffects dents from As living away home. already noted, are far from negligible.Consider household A is a centre for Yogyakarta City major tertiary whose expenditureis Rp4O,000/month (being about the mean for the sample) and has mean education. iii. While a recentbirthhas a similareffect on receiptsof about Rp4,000,but makes no outlays. receipts, a numberof otherhouseholdcharacterisCompare thiscase withthatof householdB whose tics have ratherdifferent effects on transfer beis RplO,000 lower.Then the results consumption haviour in urban areas when compared to rural forthe grosstransfers model suggest thattransfer areas. In contrastwith the ruralresults, thereis receipts for B will be Rpl,000 greaterthan A little suggestionthat ill-health affects or receipts while forthe model of net transfers, B's receipts outlays. will exceed A's by Rpl,250: roughly 10% to 12% iv. Receipts exhibita strongu shaped relationof the consumption willbe made up by inequality is inverted for ship withage, whiletherelationship transfer receipts.15 Comparinghouseholdsunder outlays. The turning points are well withinthe bounds of the data, being 52 years and 56 years 13Noting that,on defining X = log N to simplify the algefor receiptsand outlays,respectively de(neither bra, equations (1) and (2) imply that log(Tj/N) = are used). pends on whether grossor net transfers + (k 4- Yk - 1)log N for Pkllog(Y/N) j = r (k = 1) and jvalue of the regressand. For theTobit model,theseeffects are givenby theproductof theTobit coefficients (as givenin table 1) and the proportion of the sample above the limit(see, for example,McDonald and Moffitt, 1980). 16 Note that the figure of 2.0 is the exponential value of the productof the Tobit coefficient and thefraction of thesample above the limit(see footnote 15).

SOCIAL SECURITY IN A "MORAL ECONOMY"

TABLE 2.-ESTIMATES OF EQUATIONS (1) AND (2) FOR URBAN HOUSEHOLDS

43

(1) Receipts Gross 1 Net Gross -17 (2.0) 0.50 (0.65) 0.90 (1.1) -0.56 (0.61) 0.81 (1.1) -0.27 (0.24) 2.1 (0.67) 0.45 (3.0) -0.0040 (2.5) - 3.3 (3.3) 7.6 0.50 0.45

(2) Outlays Net -28 (2.5) 0.80 (0.79) 1.3 (1.2) -0.70 (0.56) 0.70 (0.70) -1.9 (1.3) -0.82 (0.18) 0.59 (2.7) -0.0052 (2.3) - 7.0 (4.7) 9.2 0.31 0.31

-3.8 -2.2 (0.39) (0.21) Income (log) 1.9 1.7 (2.1) (1.8) Household size (log) - 2.7 -2.6 (3.0) (2.8) Ill-health (week) 1.2 1.7 (1.2) (1.7) Ill-health (quarter) -0.19 -0.41 (0.22) (0.46) Births 2.8 2.2 (2.2) (1.6) Deaths 3.4 4.5 (1.0) (1.3) Age -0.63 -0.68 (4.3) (4.4) Age2 0.0060 0.0065 (3.9) (4.0) Unemployment 4.7 5.6 (4.6) (5.3) -------------------------EE--------------------------------------__------SEE 8.3 8.5 Prob (T > OIX) Predicted 0.50 0.45 Actual 0.44 0.40

Thus, in contrast to theruralresults, urbantransVII. Conclusions toward both the fers reveal significant targeting The modelled distributions of transfer receipts young and the elderly.This may reflect a differin ruralJava suggest thatdonorshold a preference betweenruraland urban ence in age distributions for less inequality.Receipts increase more than areas.17 proportionally to a fall in recipient's income.We v. In markedcontrast to theruralresults, uneminterpret thisas indicating thatthedonor'smargiploymentemergesas a significant determinant of nal utility of recipient's incomeis not only posiin the previous urban transfers; unemployment tive,but also elastic in thatincome.Donors also week increasesreceiptsand thereis also a fall in assist the sick,elderly, and households withrecent between the samples is outlays. This difference births. Donors' marginalutilityof own-income with the widelyheld view that greater consistent appears to be elastic,so theiroverall generosity wage flexibility and/or theexistence of worksharincreasesmore than proportionally withtheirinin the rural labour marketsof ing arrangements come. And most of those attributes of recipients LDCs, render "unemployment" (as conventionwhich make donors more generous, also tend to ally defined)as less seriouswelfaredisadvantage make donorswiththoseattributes less generous. thanin thecities.'8 Transfer behaviour is markedly different amongst urban households.The distribution of receipts re17Mean age of householdhead is lowerfortheurbansample veals littleaversionto inequalityand littlevari(see appendix),and thedifference is significant (t = 8.6). Again of own-income. utility Thus this is likelyto be due to students livingaway fromhome in ation in the marginal YogyakartaCity.It is also thought to be commonformigrants transfers have negligible effect on the distribution in the cityto return to their villageof originat old age. of income.Thereare other differences: We find no "Note thattherateof unemployment in theurbansampleis evidence of significant compensation for ill-health a good deal higherthan the ruralsample; 25% in the former in the patternof urban transfers. versus6% in thelatter(appendix). While transfers

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Westphal (eds.), EconomicStructure and Performance tend to be targetedtoward the elderlyin rural AcademicPress,1984). areas (other thingsbeing equal), urban transfers Booth,(Orlando: Anne, and R. M. Sundrum, Labour Absorption in also go to the young. And, unlike rural areas, Agriculture (Oxford:OxfordUniversity Press,1984). A Study and Economy: in Non-Selfish influence Collard, David, Altruism unemployment emerges as an important Economics(Oxford:MartinRobertson, 1978). on transfer behaviour. Collier,WilliamL., "Agricultural Evolutionin Java,"in G. E. Hansen (ed.), Agricultural and Rural Development in Indonesia (Boulder,Colorado: Westview Press,1981). Geertz,Clifford, Agricultural Involution (Berkeley:University of CaliforniaPress,1963). Hart, Gillian, Power, Labour and Livelihood. Processes of Change in Rural Java (Berkeley:University of CaliforniaPress,1986). Ishikawa, Shigeru, Essays on Technology, Employment and Institutions in EconomicDevelopment (Tokyo: KinokuniyaCompany,1981). McDonald, John F., and Robert A. Moffitt, "The Uses of Tobit Analysis,"thisREVIEW 62 (Aug. 1980), 318-321. Scott, James C., The Moral Economyof the Peasant (New Haven: Yale University Press,1976). and Sugden, Robert, The Economicsof Rights,Cooperation Welfare (Oxford:Basil Blackwell, 1986). Thompson,E. P., "The Moral Economyof theEnglishCrowd in the Eighteenth Century," Past and Present50 (Feb. 1971), 76-136.

REFERENCES Ahmad, Ehtisham,and Nicholas Stem, "Theory of Reform ofPublicEconomics Taxes," Journal and Indian Indirect 25 (1984), 259-298. of Inequality," Atkinson,AnthonyB., " On the Measurement 2 (June1970), 244-263. of EconomicTheory Journal of JereR., and StevenG. Craig,"The Distribution Behrman, of Local Governmental Public Services:An Exploration Review77 (Mar. Economic The American Preferences," 1987), 37-49. Behrman, Jere R., Robert A. Pollak, and Paul Taubman, "Parental Preferencesand Provision for Progeny," 90 (Feb. 1982), 52-73. of PoliticalEconomy Journal Behrman,JereR., and Raaj Kumar Sah, "What Role Does Distribution of DevelEquity Play in the International opment Aid?" in M. Syrquin,L. Taylor and L. E.

APPENDIX
DATA ANDSUMMARY A.1.-DEFIMTION OF VARIABLES TABLE Rural Variable Transfer Receipts Transfer Outlays Income Household Size Ill-health (week) Ill-health (quarter) Births Deaths Age Unemployment Definition Value of all gifts in past month received Value of all gifts made in past month Total foodand expenditure, non-food made gifts excluding of Total number members household Dummyvariable:1 if for illnessreported last week,0 otherwise As above,but for last 3 months Dummyvariable:1 if in last year, birth 0 otherwise. As above,fordeath Age of head of in years household Dummyvariable:1 if but head is in workforce out ofworkin previous week,0 otherwise. Mean (gross)3998 (net) 3293 (gross)3030 (net) 2324 39652 4.5 0.15 0.20 0.10 0.019 50 St. Dev. 14252 13370 5768 5572 36599 2.0 0.35 0.40 0.31 0.14 15 Mean 16242 15728 2558 2045 80488 4.7 0.15 0.24 0.090 0.0097 44 Urban St. Dev 38373 38069 7567 7504 80231 2.7 0.35 0.43 0.29 0.098 16

0.064

0.25

0.25

0.43

Note: All monetoryvariables are in Rupiah per month,1981 prices.