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1.Introduction to SAMs.pptx
- 1. Emerta A. Aragie November 2023 Addis Ababa, Ethiopia Workshop: Introduction to Social Accounting Matrix (SAM) and Multiplier Analysis
- 2. Emerta A. Aragie November 2023 Addis Ababa, Ethiopia Introduction to Social Accounting Matrix (SAM)
- 3. Economywide analysis • Several methods available to ex ante evaluate impact of policies and external shocks to economies. • For instance; • Partial equilibrium frameworks focus on a few sectors (e.g., a single or multi- market/farm models/agriculture sector) with strong ceteris paribus assumptions. • Lack of coverage of economywide linkages – sectors/markets are interdependent. • What is economywide analysis? • Analysis frameworks that considers the whole economy. • Markets and economic agents are interconnected, i.e., transact, interact, and respond to market signals. • E.g., Computable General Equilibrium(CGE) models • Reflects a country’s economic structure and linkages.(Theoretically grounded-see Theory of General Equilibrium- neoclassical economics)
- 4. Economywide analysis cont. • Captures the interactions between different decision-making agents in a market- based economy. • When does economywide analysis warrant? • When linkages or size effects are significant enough to warrant a whole economy’s perspective. • Examples? (i) Government doubles import tariffs on selected commodities (ii) A widespread drought causes the maize crop to fail (iii) High fuel, fertilizer and commodity prices – War in Ukraine affecting global prices • To understand these linkages, let us consider the circular flow of income in the economy • Circular flow of income is the underlying concept behind SAMs.
- 5. Circular flow of income Factor Markets Households Firms Product/com Markets Private consumption Intermediate demand Sales Wages & rents Intermediate demand Sales Factor costs Social transfers Savings & Investment Government Public consumption Investment demand Domestic private savings Public savings Direct taxes Indirect taxes Exports Foreign Markets Imports Foreign savings or capital inflows GDP (market prices) = C + I + G + X – M C G I X M GDP (factor cost) = F GDP (market prices) = F + T T F Investment I = Savings S S S S
- 6. Economywide analysis in summary should…. • Capture economic linkages • Comprehensive: all income and expenditure flows between all actors (e.g., households, government & ROW) • Adhere to economywide or macroeconomic consistency requirements(“no free lunch”) • Incomes to one are spendings to others • Accounts in SAMs • Government (revenues, expenditure) • Savings-investment • Current account (foreign exchange) • Factor markets (intensity of factors) • And (ideally) account for competition for resources – expanding sector • Factor markets (land, labor, capital) – relative prices • Product markets (supply, demand, import, export) • Economic structure influences how economic agents respond to market signals. • E.g. Dependence on domestic or imports for inputs and consumption – the impact of demand expansion would differ. • E.g. Share of value added/intermediate inputs in gross output – VA would create further demand. • SAMs are starting point of economywide models – databased for economywide analysis.
- 7. What is a Social Accounting Matrix (SAM)? • SAMs are (national) accounting frameworks or databases • Capture the circular flow of receipts and payments between agents and markets during a given year • The importance of a ‘normal’ year • Include all sectors, factors, households, government and the rest of the world • Every payment becomes someone else’s income (i.e., consistent double-entry accounting) • How are transactions captured in a SAM? • Square matrix • Payments (in columns) and receipts (in rows)
- 8. ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts SAM structure Payments Receipts
- 9. SAM in summary • The impacts of policy reforms, spending, and investments are influenced by: The initial structures of institutions (households, enterprises, the government, and the rest of the world); • E.g.: Impact import price of wheat on rural vs urban households The input–output relationships across sectors; and The factor and product market linkages between consumers and producers. • Supply responses; consumers dependance on local products • All these structures and linkages are captured in SAMs • Also, most parameter/variables for CGE models are drawn from SAMs. • Production and consumption elasticities from elsewhere • Quality of SAM data greatly influences the empirical strength of CGE analysis. • Are we using data that resembles the economy?
- 10. ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts SAM structure Value-added or GDP at factor cost Sum of payments from activities to factors When disaggregated it tells about the relative factor intensities in different sectors. Intermediate demand Goods and services used in production. When disaggregated we can analyze differences in production technologies Compare to value added to calculate ratio of factor to non-factor input spending
- 11. ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts SAM structure Factor income distribution Factor incomes paid to households (and other domestic institutions) or foreign institutions (repatriated profits) When disaggregated these accounts can tell us more about the distribution of household income
- 12. ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts SAM structure Private (household) consumption Regular consumption expenditure. When disaggregated by commodities and household types, we can analyze differences in consumption patterns of different types of households (e.g., Engel’s Law) What about own consumption? Government recurrent spending Government spending on goods and services to maintain government function. Investment demand Private and public gross capital formation; spending is typically on commodities such as cement and construction services.
- 13. ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts SAM structure Foreign trade Export earnings and import payments; commodity disaggregation allows analysis of specific trade patterns. Which cell captures which?
- 14. ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts SAM structure Government taxes Indirect tax revenue: sales tax and import duties (lumped together here); commodity disaggregation would allow us to estimate average tax rates by commodity Government taxes Direct tax revenue: personal income tax and corporate profit tax
- 15. ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts SAM structure Remittances and social transfers Households can receive transfers from government (e.g. pension or social cash transfers), or remit/receive transfers to/from other domestic households or to/from the rest of the world. What does the latter entail?
- 16. ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts SAM structure Grants, loans, and interest on foreign debt Transactions between government and the rest of the world. What does the transaction from government to the rest of the world represent?
- 17. ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts SAM structure Domestic and foreign savings Households, government, and the rest of the world all “save”. What are savings used for?
- 18. SAM Structure ACT COM FAC HHD GOV INV ROW TOT ACT Marketed output Activity incomes COM Intermediate demand Private consumption Public consumption Investment demand Exports Total demand FAC Value added Factors incomes HHD Income distribution Social transfers Remittances Household incomes GOV Producer taxes Tariffs, VAT & excise taxes Direct taxes Foreign aid Government revenues SAV Private savings Public savings Foreign savings Total savings ROW Imports Repatriated profits Debt repayments Foreign payments TOT Gross output Total supply Factor payments Household expenditures Government expenditures Total investment Foreign receipts C G I T VA GDP at factor cost GDPfc = VA GDPmp = GDPfc + T Gross domestic product at market prices GDP = C + I + G + (X – M) = domestic absorption + trade balance X M
- 19. Compilation and interpretation of a SAM • The information needed to build a SAM comes from a variety of sources. • Supply and Use Tables (SUTs) – input structure, source of demand, source of supply • National accounts (sectoral production, exp and income), • Household surveys (cons spending, and income), LFS • Government financial statistics (rev and exp), and • Balance of payments from NBE. • Placing these data within the SAM framework almost always generates inconsistencies –proto-SAMs. • Disaggregation – depend on the purpose of the SAM and structure of the economy • Data from different sources, inconsistencies in data across sources • A number of statistical estimation techniques exist to balance SAM accounts. • Cross-entropy estimation is frequently used method. • Using cell and total controls when data is reliable. • Allows for pre-specified degree of variation when uncertain.
- 20. Building a Macro-SAM→ Exercise 1 (Task 1) Complete “Task 1 Worksheet.xls” in the “Exercises” folder. The solution file is in the “Solutions” sub-folder. A brief look at the Ethiopian micro- SAM Task 1: Constructing a Macro-SAM for Ghana • As part of this training, we designed a number of Microsoft Excel-based exercises. • All exercises are based on the 2007 training SAM for Ghana. • After finishing the exercises/tasks, you can check your answer by looking at the solution worksheets. • The exercises at hand help study the structure of a SAM and the data required to build this database.
- 21. • Activity: Build an aggregate macro-SAM using 2007 data from Ghana • Outcome: Familiar with a structure of a basic SAM and how to build one. • Key data needed: • National accounts (GDP at factor cost) • National accounts (GDP at market price) • Government financial statistics (revenue and spending) • Balance of payments • Extra task: Discuss each entry of the macro-SAM • Value added—GDP at factor cost • Intermediate demand • Factor income distribution (share of labor and capital) • Private consumption • Government spending (recurrent and investment demand) • Foreign trade – determine net importer or not • Gov’t taxes
- 22. 2015 Rwanda SAM (in billions of RWF) –output of task 1. Activit’s C1 Comd’s C2 Factors Househ’d C4 Gover’t C5 Invest’t C6 Rest of World C7 Total C3-1 C3-2 Activities R1 24,996 24,996 CommoditiesR 2 12,029 12,142 1,805 4,680 5,151 35,807 Factors Labor R3-1 9,717 9,717 Capital R3-2 3,250 3,250 Households R4 9,717 3,250 1,387 2,001 16,354 Government R5 2,372 940 739 4,052 Savings R6 3,272 860 548 4,680 Rest of World R7 8,439 8,439 Total 24,996 35,807 9,717 3,250 16,354 4,052 4,680 8,439
- 23. Macro-SAMs and National Accounts • A “macro” SAM is an extension of the basic national income identities as follows: • Y = C + G + I + X-M (GDP by Expenditure) • C + T + SH = Y (Household income) • G + SG = T (Government budget) • I = SH + SG + SROW (Savings-investment) • X + SROW = M (Trade balance)
- 24. • We have so far saw and worked on the macro-SAM • We will now build a slightly disaggregated micro-SAM • Where can further data come from to further disaggregate the macro-SAM? • SUT (on supply and use of commodities) • Agricultural surveys (on production and utilization) • Labor force surveys • Household and enterprise surveys (on income and expenditure patterns) • Balance of payments data
- 25. A micro-SAM Value added Intermediate demand Marketed output Own consumption Domestic absorption Imports Imports Household income sources & income distribution
- 26. Interpreting SAM values → Exercise 2 (Task 2) Complete “Task 2 Worksheet.xls” in the “Exercises” folder. The solution file is in the “Solutions” sub-folder. Task 2: Interpreting the micro-SAM • Activity: Calculate and interpret various indicators of the Rwanda’s economic structure • Output shares, • Trade shares, • Demand shares, • Household income and expenditure shares, and • Macroeconomic indicators
- 27. IFPRI’s Nexus SAM Toolkit: A Standardized Approach to Building SAMs
- 28. • SAMs and SAM-based models are useful when economic linkages and spillover effects matter • But many developing countries don’t have SAMs or they are outdated • Even when SAMs exist, they may not be suitable • Limited information on sectors of interest (e.g., agriculture and processing) • Inappropriate household classification (farm/nonfarm, rural/urban) • Not necessarily comparable across countries • Solution is a toolkit for building standardized SAMs that adhere to common data standards and have a detailed structure with a wide range of applications Nexus SAM Toolkit reconciles data from multiple sources • Core toolkit tailored to national statistical reports • Final data reconciliation uses cross-entropy estimation • Coded in Microsoft Excel® and GAMS® Nexus SAM-building toolkit
- 29. Maize | Sorghum + millet | Rice | Wheat + barley | Other cereals | Pulses | Groundnuts | Other oilseeds | Cassava | Irish potatoes | Sweet potatoes | Other roots | Leafy vegetables | Other vegetables | Sugarcane | Tobacco | Cotton + fibers | Nuts | Bananas + plantains | Other fruits | Tea | Coffee | Cocoa | Cut flowers | Rubber | Other crops | Cattle | Raw milk | Poultry | Eggs | Sheep + goats | Other livestock | Forestry | Aquaculture | Capture fisheries Nexus 86 sector SAM structure Agricultural Sectors & Products Coal | Crude oil | Natural gas | Other mining | Meat | Fish + seafood | Dairy | Fruits + vegetables | Fats + oils | Maize milling | Sorghum + millet milling | Rice milling | Wheat + barley milling | Other grain milling | Sugar refining | Coffee processing | Tea processing | Other foods | Animal feed | Beverages | Tobacco | Cotton yarn | Textiles | Clothing | Leather + footwear | Wood | Paper | Petroleum | Chemicals | Non-metal minerals | Metals + metal products | Machinery | Equipment | Vehicles | Other manufacturing | Electricity + gas | Water supply + sewage | Construction Industrial Sectors & Products Wholesale + retail trade | Transportation + storage | Accommodation | Food services | Information + communication | Finance + insurance | Real estate activities | Business services | Public administration | Education | Health + social work | Other services Service Sectors & Products 35 39 12 Crop land | Crop, livestock, mining and nonagricultural capital | Rural and urban labor by education category Factors of Production Rural farm and nonfarm households and urban households by national per capita expenditure quintiles Household groups 13 15
- 30. Macro data National accounts (SNA 2008) Balance of payments (IMF BOP6) Gov. finance (IMF GFSM2014) Micro data Agriculture production (FAOSTAT) Industrial + economic surveys Energy balance (IEA) Trade flows (COMTRADE) Tariffs (TRAINS) Labor force surveys Household surveys (LSMS) Input-output table Rebased national accounts Agriculture censuses + surveys Industrial firm surveys SAM Data Sources & Nexus Toolkit Nexus SAM Toolkit reconciles data from multiple sources • Core toolkit tailored to national statistical reports • Final data reconciliation uses cross-entropy estimation • Coded in Microsoft Excel® and GAMS®
- 31. Nexus SAM Building Process Step 1: Macro SAM Single aggregate activity, commodity, labor and household accounts Step 2: Supply-Use Table Disaggregate and balance activity and commodity accounts Extension: Regional disaggregation Split activity, factors, and household accounts Step 3: Income Distribution Disaggregate and balance labor and household accounts
- 32. Optional: SAM Multiplier Model Equation System
- 33. Multiplier Model: Standard SAM Activities Commodities Factors House- holds Exog. demand Total A1 A2 C1 C2 F H E A1 X1 X1 A2 X2 X2 C1 Z11 Z12 C1 E1 Z1 C2 Z21 Z22 C2 E2 Z2 F V1 V2 V H V1 + V2 Y E L1 L2 S E X1 X2 Z1 Z2 V Y E X Gross output of each activity (X1 and X2) Z Total demand for each commodity (Z1 and Z2) V Total factor income Y Total household income E Exogenous demand for each commodity (GOV, INV, EXP)
- 34. Multiplier Model: Coefficient matrix Activities Commodities Factors House- holds Exog. demand Total A1 A2 C1 C2 F H E A1 b1= X1/Z1 X1 A2 b2= X2/Z2 X2 C1 a11=Z11/X1 a12=Z12/X2 c1 = C1/Y E1 Z1 C2 a21=Z21/X1 a22=Z22/X2 c2 = C2/Y E2 Z2 F v1=V1/X1 v2=V2/X2 V H 1 Y E l1 = L1/Z1 l2 = L2/Z2 s = S/Y E X1 X2 Z1 Z2 V Y E a Technical coefficients (intermediate input shares) b Share of domestic output in total demand v Share of value-added (factor income) in gross output l Share of the value of total demand from imports or commodity taxes c Household consumption expenditure shares s Household savings rate (i.e., savings as a share of household income)
- 35. Activities Commodities Factors House- holds Exog. demand Total A1 A2 C1 C2 F H E A1 b1= X1/Z1 X1 A2 b2= X2/Z2 X2 C1 a11=Z11/X1 a12=Z12/X2 c1 = C1/Y E1 Z1 C2 a21=Z21/X1 a22=Z22/X2 c2 = C2/Y E2 Z2 F v1=V1/X1 v2=V2/X2 V H 1 Y E l1 = L1/Z1 l2 = L2/Z2 s = S/Y E X1 X2 Z1 Z2 V Y E Multiplier Model: Coefficient matrix Domestic production 𝑋1 = 𝑏1𝑍1 𝑋2 = 𝑏2𝑍2 𝑌 = 𝑣1𝑋1 + 𝑣2𝑋2 = 𝑣1𝑏1𝑍1 + 𝑣2𝑏2𝑍2 Household income Substitute X’s and Y’s 𝑍1 = 𝑎11𝑋1 + 𝑎12𝑋2 + 𝑐1𝑌 + 𝐸1 𝑍2 = 𝑎21𝑋1 + 𝑎22𝑋2 + 𝑐2𝑌 + 𝐸2 Demand equations
- 36. Multiplier Model: Coefficient matrix 1 − 𝑎11𝑏1 − 𝑐1𝑣1𝑏1 𝑍1 + −𝑎12𝑏2 − 𝑐1𝑣2𝑏2 𝑍2 = 𝐸1 Simplify and reorganize with E on the right-hand side −𝑎21𝑏1 − 𝑐2𝑣1𝑏1 𝑍1 + 1 − 𝑎22𝑏2 − 𝑐2𝑣2𝑏2 𝑍2 = 𝐸2 1 − 𝑎11𝑏1 − 𝑐1𝑣1𝑏1 −𝑎12𝑏2 − 𝑐1𝑣2𝑏2 −𝑎21𝑏1 − 𝑐2𝑣1𝑏1 1 − 𝑎22𝑏2 − 𝑐2𝑣2𝑏2 𝑍1 𝑍2 = 𝐸1 𝐸2 In matrix format 𝐼 − 𝑀 𝑍 = 𝐸 or ∆𝑍 = (𝐼 − 𝑀)−1 × ∆𝐸 Change in exogenous demand (simulation shock) Change in total demand (simulation result) Multiplier matrix: identity matrix minus coefficient matrix