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The Impact of Budget Retrenchment on Income Distribution in Indonesia (including Statistical Annex): A Social Accounting Matrix Application

Author

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  • Steven Keuning

    (Institute of Social Studies)

  • Erik Thorbecke

    (Cornell University)

Abstract

This document sets out a new method for assessing the implications of public expenditure cuts for income distribution. The instrument is a social accounting matrix providing the appropriate conceptual framework for estimating all the direct and indirect effects of changes in any given category of public expenditure (e.g. agricultural investment or education spending). By using this matrix it is possible to calculate the upstream effects of an adjustment measure on income distribution. It shows, for instance, that a decline in agricultural investment reduces employment and wages in the building sector. Similarly, a fall in education spending depresses the incomes of the skilled dependent labour force. The downstream effects have also been estimated: in the case of education this means cutbacks in free services to families and so a fall in their incomes. This method has been applied to Indonesia in 1984-88 by comparing the observed effects of lower public spending due to structural ... L'impact d'une réduction des dépenses budgétaires sur la distribution des revenus en Indonésie : Utilisation d'une matrice de comptabilité sociales Ce document présente une nouvelle méthode pour évaluer l'incidence des réductions de dépenses publiques sur la distribution des revenus. L'instrument choisi est une matrice de compatibilité sociale qui fournit le cadre conceptuel approprié pour estimer l'ensemble des effets directs et indirects de la variation d'une catégorie de dépenses publiques (par exemple les investissements dans l'agriculture ou les dépenses d'éducation). Grâce à cette matrice, on peut calculer les effets en amont d'une mesure d'ajustement sur la distribution des revenus; on observe ainsi que la baisse des investissements dans l'agriculture entraîne une réduction de l'emploi et des salaires dans le secteur du bâtiment, de même que la baisse des dépenses d'éducation conduit à celle des revenus des salariés qualifiés. D'autre part, on estime les effets en aval : pour l'éducation cela se traduit par une diminution des services fournis gratuitement aux familles et donc une diminution de leur ...

Suggested Citation

  • Steven Keuning & Erik Thorbecke, 1989. "The Impact of Budget Retrenchment on Income Distribution in Indonesia (including Statistical Annex): A Social Accounting Matrix Application," OECD Development Centre Working Papers 3, OECD Publishing.
    • Handle: RePEc:oec:devaaa:3-en
    DOI: 10.1787/867347160101
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    Cited by:

    1. Jorge Martínez-Vázquez & Violeta Vulovic & Blanca Moreno Dodson, 2012. "The Impact of Tax and Expenditure Policies on Income Distribution: Evidence from a Large Panel of Countries," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 95-130, March.
    2. Thierry Mayer, 2006. "Policy Coherence for Development : A Background paper on Foreign Direct Investment," SciencePo Working papers Main hal-01065640, HAL.
    3. repec:hal:spmain:info:hdl:2441/10184 is not listed on IDEAS

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