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SOCIAL ACCOUNTING MATRICES

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Title: SOCIAL ACCOUNTING MATRICES


1
SOCIAL ACCOUNTING MATRICES
  • SOME USES OF MULTIPLIERS
  • AND
  • DECOMPOSITION ANALYSIS
  • JEFF ROUND
  • January 2012

2
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3
  • Motivations for compiling a SAM
  • Description
  • - Useful snapshot of economic structure
  • Construction
  • - Good organising framework
  • - Draws together data from disparate sources
  • Basis for modelling
  • - Data for calibrating macro and macro-meso
    models
  • - Multiplier models capture structural features
  • - CGE models, microsimulation, etc.

4
  • SAM-based modelling
  • Multiplier models (fixed price models)
  • - many examples in development economics
  • - decomposition analysis is prominent
  • CGE models (flexible price models)
  • - many examples in development economics
  • - trade, income distribution and poverty
    analysis
  • Pros and cons between multiplier and CGE models
  • - former are a special case of the latter
  • - advantages and disadvantages of both
    approaches
  • multiplier models offer simple insights and
    transparency
  • CGE attempt to capture more endogenous behaviour
  • - N.B. need to note that all models invoke
    assumptions

5
SAM-based multiplier models
  • - Aim is to capture the circular flow of income
    producers to consumers and vice-versa.
  • - We need to distinguish between endogenous and
    exogenous accounts
  • - Exogenous transactions usually defined as the
    income and outlays of government, capital
    investment and rest of the world
  • - Endogenous transactions usually the
    production, factor and institution (households)
    accounts capturing the circular flow of income

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7
Multiplier models how they work ...
  • ... Secondary effects
  • increase in supply of inputs (standard
    input-output multipliers)
  • Secondary effects spending by households
  • Factor income payments for factor services
    supplied (stemming from primary effects)
  • Spending out of income by households
  • Further secondary (i.e. multiplier) effects
  • Output effects
  • Income effects

8
Example a simple SAM-based multiplier analysis
Sector 1 Agriculture
Sector 2 Manufacturing
9
Example a simple SAM-based multiplier analysis
  • Exogenous shock
  • Extra 10 units demand for agricultural products
  • (e.g. exports?)
  • What are the expected effects under the
    multiplier model approach?
  • Takes account of repercussions due to
  • Intersectoral linkages
  • Stimulus due to additional income and spending

10
Example a simple SAM-based multiplier analysis
  • Under input-output assumptions
  • Sector 1 output increases by 11.9
  • Sector 2 output increases by 2.8
  • RHH income increases by 3.0
  • UHH income increases by 4.2
  • Under SAM-based multiplier assumptions
  • Sector 1 output increases by 22.1
  • Sector 2 output increases by 10.0
  • RHH income increases by 6.9
  • UHH income increases by 8.7

11
Multiplier decomposition
  • Fixed price multipliers
  • Pyatt-Round (P-R) multiplier decomposition
  • M1 within-group effects
  • M2 cross-group effects
  • M3 between-group effects
  • Stone additive decomposition

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13
  • Defourny-Thorbecke (D-T) decomposition
  • - argued that P-R has operational limitations
    i.e. difficult
  • to identify what are the important paths
    (loops) in the
  • process
  • - use structural path analysis based on graph
    theory
  • - computes every conceivable loop in following
    through an
  • exogenous injection and its resultant impact
    on
  • endogenous accounts
  • - requires software to compute and rank all path
  • multipliers (Direct influence, Total
    influence, Global
  • influence)
  • - example based on SAM for Korea (EJ 1984)

14
  • Pyatt-Round decomposition an extension
  • - aim is to show how the P-R decomposition can
    achieve the D-T decomposition objectives
  • the method shows the contributions to an element
    of the total multiplier, mij due to different
    paths
  • consider impact on income of HH i of unit
    increase in
  • output of activity j
  • instead we form an rAs transform based on
    and

15
  • Example Indonesia SAM
  • SAM 9 institution groups, 13 production
    activities
  • I7 urban unskilled households
  • P9 public works
  • to consider the effects of a one unit injection
    of expenditure into public works (P9) on the
    income of urban unskilled households (I7)

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17
Poverty analysis
  • What does the SAM-based multiplier analysis give
    us?
  • Income responses to socio-economic groups of HHs
  • Sectoral responses
  • What does a SAM-based analysis not give us?
  • Income responses to individual households
  • Poverty analysis needs some additional
    information on how individual incomes (and
    expenditures) change
  • Poverty elasticities for each HH group
  • Need to assume an analytical income distribution

18
Poverty analysis
  • Calculating the effects on HH group (mean) income
  • Translate this group mean income into change in
    poverty (using poverty elasticities)

19
Table 7 Indonesia poverty calculations
20
  • More applications of multiplier analysis ...
  • Sri Lanka
  • - early study which established the P-R
    decomposition method
  • - observation that between-group effects dominate
    other multiplier effects
  • - observation that some household groups are
    relatively unaffected no matter where the
    impulse originates
  • - Stone observed that distributional effects in
    the third term are approximately invariant
    (Stone phenomenon)

21
Sri Lanka multiplier decomposition
Source Pyatt and Round, 1979
22
  • More applications of multiplier analysis ...
  • Ghana
  • - example of the Pyatt-Round decomposition to
    examine structure, using Stone additive method
  • - confirmed the Stone phenomenon
  • Korea
  • - Defourny-Thorbecke structural path analysis
  • - indirect effects may produce significantly
    larger impacts than direct (elementary) paths

23
  • More applications of multiplier analysis ...
  • Indonesia
  • - Keuning Thorbecke used SAM multiplier
    analysis to trace through effects of
    government budget retrenchment (i.e. negative
    effects)
  • - ten household groups, effects on income
    distribution more sensitive to exogenous shocks
  • - also build in loss of imputed benefits due to
    reduction in health and education

24
Reflecting on fixed price multiplier models
  • Advantages
  • Relatively simple to comprehend
  • Simple to compute (Excel, spreadsheet)
  • Based on structural features exhibited by base
    SAM
  • Disadvantages
  • Responses at the margin might differ from those
    on average
  • Bottlenecks will mean multiplier effects are
    overestimated
  • Price effects might also mean effects are
    overestimated
  • Limited endogenous behaviour will mean effects
    are underestimated

25
SAMs current work and in prospect
  • SAM construction
  • - mathematical balancing methods have
    predominated
  • - more work needed on basic surveys and data
    assembly
  • Design of SAMs
  • - current work on multipliers and the Stone
    phenomenon
  • - indicates that there is an optimal design
    for
  • distributional analysis
  • Environmental extensions
  • - environmental and satellite SAMs show much
    promise
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