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Social accounting matrix

A social accounting matrix (SAM) represents flows of all economic transactions that take place within an economy (regional or national). It is at the core, a matrix representation of the national accounts for a given country, but can be extended to include non-national accounting flows, and created for whole regions or area. SAMs refer to a single year providing a static picture of the economy.

Overview edit

SAMs are square (having the same number of columns as rows) because all institutional agents (Firms, Households, Government and 'Rest of Economy' sector) are both buyers and sellers. Columns represent buyers (expenditures) and rows represent sellers (receipts). SAMs were created to identify all monetary flows from sources to recipients, within a disaggregated national account. The SAM is read from column to row, so each entry in the matrix comes from its column heading, going to the row heading. Finally columns and rows are added up, to ensure accounting consistency, and each column is added up to equal each corresponding row. In the illustration below for a basic open economy, the item C (consumption) comes from Households and is paid to Firms.

Illustrative Open Economy SAM:[1]

Firm Household Government Rest of Economy Net Investment Total (Received)
Firm C GF (X-M)K I C+GF+(X-M)K+I
Household W GH (X-M)C W+GH+(X-M)C
Government TF TH TF+TH
Rest of Economy (X-M)K (X-M)C (X-M)K+(X-M)C
Net Investment SH SG SH+SG
Total (Expended) W+TF+(X-M)K C+TH+(X-M)C+SH GF+GH+SG (X-M)C+(X-M)K I

Abbreviations: Capital letters: Taxes, Wages, iMports, eXports, Savings, Investment, Consumption, Government Transfer Subscripts: Firms, Households, Government, Consumption Goods, K: Capital Goods

History edit

SAM's were originally developed at the "Cambridge Growth Project" in Cambridge, UK, which developed the first SAM in 1962 (Stone and Brown 1962). They were built as a matrix representation of the National Account, and came to the World Bank with Graham Pyatt in the 1960s (Pyatt had worked for Richard Stone at the Cambridge Growth Project). Pyatt left Cambridge and "developed SAMs, mainly at the World Bank",[2] becoming together with Erik Thorbecke, the leading proponents and developers of SAMs.[3]

"By the early 1980s, CGE models were heavily ensconced as the approach of the World Bank for development analysis. Social Accounting Matrices (SAMs) were similarly a mainstay of Bank analysis, which had been adopted as a presentational device by the CGE modelers" (Mitra-Kahn 2008: 23)

Applications edit

SAMs can be easily extended to include other flows in the economy, simply by adding more columns and rows, once the standard national account (SNA) flows have been set up. Often rows for 'capital' and 'labor' are included, and the economy can be disaggregated into any number of sectors. Each extra disaggregated source of funds must have an equal and opposite recipient. So the SAM simplifies the design of the economy being modeled. SAMs are currently in widespread use, and many statistical bureaus, particularly in OECD countries, create both a national account and this matrix counterpart.

SAMs form the backbone of computable general equilibrium (CGE) Models and various types of empirical multiplier models.

Appropriately formatted SAMs depict the spending patterns of an economy, as with IMPLAN and RIMS II data, and can be used in economic impact analysis.

Benchmarking edit

Using a SAM includes the institutional structure assumed in the national accounts into any model. This means that variables and agents are not treated with monetary source-recipient flows in mind, but are rather grouped together in different categories according to the United Nations Standardised National Accounting (SNA) Guidelines. For example, the national accounts usually imputes the value of household investment or home-owner 'rental' income and treats some public sector institutional investment as direct income flows - whereas the SAM is trying to show just the explicit flows of money. Thus the data has to be untangled from its inherent SNA definitions to become money flow variables, and they then have to equal across each row and column, which is a process referred to as 'Benchmarking'.

A theoretical SAM always balances, but empirically estimated SAM's never do in the first collation. This is due to the problem of converting national accounting data into money flows and the introduction of non-SNA data, compounded by issues of inconsistent national accounting data (which is prevalent for many developing nations, while developed nations tend to include a SAM version of the national account, generally precise[note 1] to within 1% of GDP). This was noted as early as 1984 by Mansur and Whalley, and numerous techniques have been devised to 'adjust' SAMs, as "inconsistent data estimated with error, [is] a common experience in many countries".[4]

The traditional method of benchmarking a SAM was simply known as the "Row-and-Columns" (RoW) method where one finds an arithmetic average of the total differences between the row and column in question, and adjust each individual cell until the row and column equal.

Robinson et al. (2001) suggests an improved method for 'adjusting' an unbalanced SAM in order to get all the rows and columns to equal, and gives the example of a SAM created for Mozambique's economy in 1995, where the process of gathering the data, creating the SAM and 'adjusting' it, is thoroughly covered by Arndt et al. (1997).[note 2] On inspecting the changes made to the Mozambique's 1995 SAM[note 3] to achieve balance is an adjustment of US$295 million[note 4] which meant that $227 m US was added to the SAM net, just to balance the rows and columns. For 1995 this adjustment is equivalent to 11.65% of GDP. More disconcerting is perhaps the fact that agricultural producers (which according to FAO (1995) employed 85% of the labor force in 1994) were given a US$58 million pay raise in the SAM, meaning that 10% of agricultural income (equivalent to 5% of GDP) in the SAM was created, out of thin air. In other words, for a country where 38% of the population lived for less than $1 in the period 1994–2004 (UNICEF 2008), this SAM 'adjustment' added $4.40 to each person's income in the agricultural sector[note 5] – more than any of the later trade and tax models using this SAM could arguably hope to achieve.

See also edit

Notes edit

  1. ^ Imprecision is caused by omissions in the datasets, but I use the word 'precise' rather than accurate, as the process from raw micro-data to national accounting data is not a streamlined system globally, and even if there is a 1% discrepancy in the account itself, this is more than often the result of careful double-entry bookkeeping and classifications, rather than accurate descriptions of economic activity, or theoretical reasoning. If data is consistently recorded the same way, there should be no issue comparing year to year, but the 1% precision is often a better indicator of the accountant, as opposed to the quality of the data.
  2. ^ In Robinson et al. (2001) the reference is in fact to a 1994 SAM for Mozambique, as created by Arndt et al. 1997b, but this is somewhat misleading as IFPRI had already published Arndt et al. 1997b as a working paper (referenced here as Arndt et al. [1997]) which is the only available copy and which included Robinson as an added author. While both papers created a SAM for 1994 and 1995, the one used in Robinson et al. 2001 is in fact the 1995 SAM, not 1994 as referenced in the paper.
  3. ^ The SAM is reproduced in appendix I of Mitra-Kahn (2008), for the unbalanced, the official balanced, and the suggested improved version.
  4. ^ Exchange rate used is the Bank of International Settlements (2005) average exchange rate for 1995 at 8819.75 Mozambique meticais per $1 US.
  5. ^ Both figures based on 85% of the population being in agriculture.

References edit

Citations edit

  1. ^ See Mitra-Kahn (2008), pp. 54-56 for this SAM 2009-03-25 at the Wayback Machine
  2. ^ Vanoli 2001 p. 170
  3. ^ See for example Pyatt and Thorbecke, 1976, Planning Techniques for a better future, International Labor Organization
  4. ^ Robinson, Cattaneo and El-Said 2001: p. 1

Sources edit

  • Arndt, C., Cruz, A, Jensen, H.T., Robinson, S., Tarp, F., 1997, "Social Accounting Matrices for Mozambique 1994 and 1995", TMD Discussion Paper 28, Washington, D.C.: International Food Policy Research Institute
  • Bank of International Settlements, 1995, (on-line 15 Jan 2008) The Payment System in Mozambique, published by Committee on payment systems
  • Mitra-Kahn, Benjamin H., 2008, "", SCEPA Working Paper 01-2008
  • Pyatt, G. and Thorbecke, E., 1976, Planning Techniques for a Better Future, International Labour Office.
  • Robinson, S., Cattaneo, A., and El-Said, M., 2001, "Updating and Estimating a Social Accounting Matrix Using Cross Entropy Methods", Economic Systems Research 13 (1), pp. 47–64.
  • Stone, R. and Brown, A., 1962, A computable model for economic growth. Cambridge, England: Cambridge Growth Project.
  • UNICEF, 2008 (on-line 15 Jan 2008), "UNICEF country overview: Mozambique", in UNICEF statistical section.
  • Vanoli, A., 2005, A History of National Accounting, English Edition (original in French, 2001), Amsterdam: 2005.

Further reading edit

  • Pyatt and Round, 1985, "Social Accounting Matrices: A Basis for Planning", The World Bank
  • Mansur, A. & Whalley, J, 1984, "Numerical specification of applied general equilibrium models: Estimation, calibration, and data", in Scarf, H.E., and Shoven, J.B. (Eds.), 1984, Applied General Equilibrium analysis, Cambridge, UK: Cambridge University Press

social, accounting, matrix, social, accounting, matrix, represents, flows, economic, transactions, that, take, place, within, economy, regional, national, core, matrix, representation, national, accounts, given, country, extended, include, national, accounting. A social accounting matrix SAM represents flows of all economic transactions that take place within an economy regional or national It is at the core a matrix representation of the national accounts for a given country but can be extended to include non national accounting flows and created for whole regions or area SAMs refer to a single year providing a static picture of the economy Contents 1 Overview 2 History 3 Applications 4 Benchmarking 5 See also 6 Notes 7 References 7 1 Citations 7 2 Sources 8 Further readingOverview editSAMs are square having the same number of columns as rows because all institutional agents Firms Households Government and Rest of Economy sector are both buyers and sellers Columns represent buyers expenditures and rows represent sellers receipts SAMs were created to identify all monetary flows from sources to recipients within a disaggregated national account The SAM is read from column to row so each entry in the matrix comes from its column heading going to the row heading Finally columns and rows are added up to ensure accounting consistency and each column is added up to equal each corresponding row In the illustration below for a basic open economy the item C consumption comes from Households and is paid to Firms Illustrative Open Economy SAM 1 Firm Household Government Rest of Economy Net Investment Total Received Firm C GF X M K I C GF X M K I Household W GH X M C W GH X M C Government TF TH TF TH Rest of Economy X M K X M C X M K X M C Net Investment SH SG SH SG Total Expended W TF X M K C TH X M C SH GF GH SG X M C X M K I Abbreviations Capital letters Taxes Wages iMports eXports Savings Investment Consumption Government Transfer Subscripts Firms Households Government Consumption Goods K Capital GoodsHistory editSAM s were originally developed at the Cambridge Growth Project in Cambridge UK which developed the first SAM in 1962 Stone and Brown 1962 They were built as a matrix representation of the National Account and came to the World Bank with Graham Pyatt in the 1960s Pyatt had worked for Richard Stone at the Cambridge Growth Project Pyatt left Cambridge and developed SAMs mainly at the World Bank 2 becoming together with Erik Thorbecke the leading proponents and developers of SAMs 3 By the early 1980s CGE models were heavily ensconced as the approach of the World Bank for development analysis Social Accounting Matrices SAMs were similarly a mainstay of Bank analysis which had been adopted as a presentational device by the CGE modelers Mitra Kahn 2008 23 Applications editSAMs can be easily extended to include other flows in the economy simply by adding more columns and rows once the standard national account SNA flows have been set up Often rows for capital and labor are included and the economy can be disaggregated into any number of sectors Each extra disaggregated source of funds must have an equal and opposite recipient So the SAM simplifies the design of the economy being modeled SAMs are currently in widespread use and many statistical bureaus particularly in OECD countries create both a national account and this matrix counterpart SAMs form the backbone of computable general equilibrium CGE Models and various types of empirical multiplier models Appropriately formatted SAMs depict the spending patterns of an economy as with IMPLAN and RIMS II data and can be used in economic impact analysis Benchmarking editUsing a SAM includes the institutional structure assumed in the national accounts into any model This means that variables and agents are not treated with monetary source recipient flows in mind but are rather grouped together in different categories according to the United Nations Standardised National Accounting SNA Guidelines For example the national accounts usually imputes the value of household investment or home owner rental income and treats some public sector institutional investment as direct income flows whereas the SAM is trying to show just the explicit flows of money Thus the data has to be untangled from its inherent SNA definitions to become money flow variables and they then have to equal across each row and column which is a process referred to as Benchmarking A theoretical SAM always balances but empirically estimated SAM s never do in the first collation This is due to the problem of converting national accounting data into money flows and the introduction of non SNA data compounded by issues of inconsistent national accounting data which is prevalent for many developing nations while developed nations tend to include a SAM version of the national account generally precise note 1 to within 1 of GDP This was noted as early as 1984 by Mansur and Whalley and numerous techniques have been devised to adjust SAMs as inconsistent data estimated with error is a common experience in many countries 4 The traditional method of benchmarking a SAM was simply known as the Row and Columns RoW method where one finds an arithmetic average of the total differences between the row and column in question and adjust each individual cell until the row and column equal Robinson et al 2001 suggests an improved method for adjusting an unbalanced SAM in order to get all the rows and columns to equal and gives the example of a SAM created for Mozambique s economy in 1995 where the process of gathering the data creating the SAM and adjusting it is thoroughly covered by Arndt et al 1997 note 2 On inspecting the changes made to the Mozambique s 1995 SAM note 3 to achieve balance is an adjustment of US 295 million note 4 which meant that 227 m US was added to the SAM net just to balance the rows and columns For 1995 this adjustment is equivalent to 11 65 of GDP More disconcerting is perhaps the fact that agricultural producers which according to FAO 1995 employed 85 of the labor force in 1994 were given a US 58 million pay raise in the SAM meaning that 10 of agricultural income equivalent to 5 of GDP in the SAM was created out of thin air In other words for a country where 38 of the population lived for less than 1 in the period 1994 2004 UNICEF 2008 this SAM adjustment added 4 40 to each person s income in the agricultural sector note 5 more than any of the later trade and tax models using this SAM could arguably hope to achieve See also editComputable general equilibrium Input output modelNotes edit Imprecision is caused by omissions in the datasets but I use the word precise rather than accurate as the process from raw micro data to national accounting data is not a streamlined system globally and even if there is a 1 discrepancy in the account itself this is more than often the result of careful double entry bookkeeping and classifications rather than accurate descriptions of economic activity or theoretical reasoning If data is consistently recorded the same way there should be no issue comparing year to year but the 1 precision is often a better indicator of the accountant as opposed to the quality of the data In Robinson et al 2001 the reference is in fact to a 1994 SAM for Mozambique as created by Arndt et al 1997b but this is somewhat misleading as IFPRI had already published Arndt et al 1997b as a working paper referenced here as Arndt et al 1997 which is the only available copy and which included Robinson as an added author While both papers created a SAM for 1994 and 1995 the one used in Robinson et al 2001 is in fact the 1995 SAM not 1994 as referenced in the paper The SAM is reproduced in appendix I of Mitra Kahn 2008 for the unbalanced the official balanced and the suggested improved version Exchange rate used is the Bank of International Settlements 2005 average exchange rate for 1995 at 8819 75 Mozambique meticais per 1 US Both figures based on 85 of the population being in agriculture References editCitations edit See Mitra Kahn 2008 pp 54 56 for this SAM Archived 2009 03 25 at the Wayback Machine Vanoli 2001 p 170 See for example Pyatt and Thorbecke 1976 Planning Techniques for a better future International Labor Organization Robinson Cattaneo and El Said 2001 p 1 Sources edit Arndt C Cruz A Jensen H T Robinson S Tarp F 1997 Social Accounting Matrices for Mozambique 1994 and 1995 TMD Discussion Paper 28 Washington D C International Food Policy Research Institute Bank of International Settlements 1995 on line 15 Jan 2008 The Payment System in Mozambique published by Committee on payment systems Mitra Kahn Benjamin H 2008 Debunking the Myths of Computable General Equilibrium Models SCEPA Working Paper 01 2008 Pyatt G and Thorbecke E 1976 Planning Techniques for a Better Future International Labour Office Robinson S Cattaneo A and El Said M 2001 Updating and Estimating a Social Accounting Matrix Using Cross Entropy Methods Economic Systems Research 13 1 pp 47 64 Stone R and Brown A 1962 A computable model for economic growth Cambridge England Cambridge Growth Project UNICEF 2008 on line 15 Jan 2008 UNICEF country overview Mozambique in UNICEF statistical section Vanoli A 2005 A History of National Accounting English Edition original in French 2001 Amsterdam 2005 Further reading editPyatt and Round 1985 Social Accounting Matrices A Basis for Planning The World Bank Mansur A amp Whalley J 1984 Numerical specification of applied general equilibrium models Estimation calibration and data in Scarf H E and Shoven J B Eds 1984 Applied General Equilibrium analysis Cambridge UK Cambridge University Press Retrieved from https en wikipedia org w index php title Social accounting matrix amp oldid 1070993112, wikipedia, wiki, book, books, library,

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