Living Standards Measurements Study - Serbia 2002 - 2007

2. INCOME AND EXPENDITURE
2.1. Welfare aggregates
Two aggregates can be used to measure living
standards, i.e. the welfare of the population:
household expenditure and household income.
Household expenditure represents a more reliable
measure of the welfare of the population, because of
its stability, scope and balance over an extended
time period, whereas household income is
susceptible to short-term fluctuations. The quality of
data received through this survey from households
is of great importance when selecting the measure
of financial welfare (expenditure or income). The
drawback of using income as a measure of welfare
is that households avoid declaring their income, in
particular for incomes arising from unregistered
businesses, i.e. informal activities, which is not the
case for expenditure from these sources (the reason
being the distrust of households in confidentiality of
the survey). Both theoretical and practical reasons
give precedence to the use of expenditure
aggregates over income to measure welfare.
2.2. Definition of aggregate income
Aggregate income includes income (earnings)
from employment, pensions, receipts from social
insurance, cash receipts from abroad, income from
agriculture, income in kind, other income, as well as
the value of the imputed rent and depreciation and
amortization of permanent assets.
Revenues (earnings) from employment
comprise the earnings from the main job, from an
additional job and other earnings from employment,
such as: outstanding salary payments, financial
allowances against commuting costs and time spent
on business trips in the country and abroad,
retirement severance pays, rewards, one-off
financial supports, and the like.
Pensions include all types of (national)
pensions: old-age, disability and family pensions.
Revenues from social insurance imply the
benefits such as child allowances, allowances for
care and assistance by a third person, family
financial support payments, alimony, parent’s
(maternal) allowances and other social benefits.
This group of income also includes the benefits
against financial support for the unemployed and
temporarily unemployed persons, as well as
temporary benefits paid to displaced persons.
Cash receipts from abroad comprise foreign
pensions or parts thereof and monetary gifts from
relatives and friends living abroad.
Income from agriculture has been calculated
as a difference between the amount of revenues and
expenses from agricultural activity. The income
from agriculture encompasses the income from land
rent, lease of agricultural machines, revenues from
crops, cattle and poultry, and farming products. The
income from agriculture also includes the in-kind
component of food– the food produced or received
as gift in farms. Expenses comprise all the costs
necessary for the conduct of agricultural activities,
such as: purchase of seed, fertilizers, stock-cattle
feed, fuel and lubricants, veterinary services,
payment of labour force, land rent, lease of
agricultural machines and depreciation of
agricultural machines 1 .
Income from agriculture calculated in this way
is compared with subjective assessments provided
by households (respondents) regarding the amount
of generated annual income, where the higher
amount is taken as the final amount of income from
agriculture. Comparison is made because of the
complex method of computing that amount. Since
the income from agriculture is calculated for a oneyear
period, there is a possibility that certain
households may underestimate the value of the
reported income due to insufficient or missing
documentation. Likewise, in case the calculation of
the income from agriculture shows a negative
balance, it is deemed that a household failed to
generate any income from this activity.
Income in kind - the in-kind component of
income comprises the value of self-made products
and gifts received in-kind and consumed in a
household. The value of the in-kind component of
income is expressed in local retail prices.
Other revenues include financial support for
education and health services provided to household
members, monetary gifts from relatives and friends
in the country, receipts from interest, dividends,
insurance policies, games of chance, renting of
residential and business premises, etc.
30 Living Standards Measurements Study - Serbia 2002 - 2007