- **9 Macro-validation and limitations of the analysis**

- **9.1 Macro-validation**

**This section presents an overview of how well each instrument is modeled by comparing survey estimations with official fiscal administrative data.** We call this process “macro-validation” because it allows us to validate our methodology by comparing the results in the survey at the national level with the results in the national accounts (Table 9-1). Note that East Jerusalem is excluded for all the instruments shown in the table as well as for consumption.

- **Total consumption:** As outlined earlier, Disposable Income in this study is equivalent to the household consumption aggregate in the PECS 2016/17. The survey has good coverage of households’ consumption as total consumption in the PECS represented about 81 percent of the official aggregate in national accounts.<sup>77</sup> We expected a slight gap between the survey and macro estimations of household consumption due to methodological differences between the survey and national accounts and both non-response rates of wealthier households and underestimation of income levels of wealthier households (see the section on limitations).

- **Taxes:** All direct taxes simulated in the PECS have good coverage of their respective administrative absolute values; that is, the amounts allocated in the survey are close in size to the amounts reported in the executed budget. The PIT covers 85 percent of the official administrative value of tax collections; pension contributions covered 108 percent and the property tax covered 84 percent. Indirect taxes—customs duties, VAT and fuel excise—covered 66, 95 and 73 percent, respectively, of total administrative value of tax collections. The Property Tax, and the VAT were scaled to match the effective rate relative to consumption (0.03 and 6.6 percent, respectively).

- **Transfers:** The total of CTP and in-kind transfers in the survey covered 65 percent of the administrative data, where income from pensions covered 107 percent (similar to the pension contributions). The value of indirect subsidies from domestic electricity and fuel (jointly) compared to the official administrative value cannot be estimated because the survey data includes both implicit and explicit subsidies, unlike the administrative data.  The value of in-kind benefits from primary and hospital public services both represented 85 percent of the administrative value. Lastly, for in-kind benefits from public education, the survey estimates covered 99 percent of the administrative value for basic education and 79 percent for secondary education. Originally basic education benefits were overestimated suggesting that the PECS 2016/17 overestimates total students enrolled in basic education at public schools. Recipients of the basic education subsidy are therefore scaled down as discussed in the methodology section. 78

> 77 It is not clear whether the national accounts amount includes East Jerusalem or not. If it does, then it is more appropriate to compare it with consumption including East Jerusalem also, which would result in a ratio of 95 percent.

> 78 As highlighted in the methodology, one limitation of the PECS is that the education model did not allow to identify ‘current grade where the student is enrolled’. Hence the current grade was estimated as ‘highest grade achieved’ + 1 year if the student was currently attending a public school.

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