Updating and estimating a Social Accounting Matrix using cross entropy methods
The problem in estimating a social accounting matrix (SAM) for a recent year is to find an efficient and cost-effective way to incorporate and reconcile information from a variety of sources, including data from prior years. Based on information theory, the paper presents a flexible “cross entropy” (CE) approach to estimating a consistent SAM starting from inconsistent data estimated with error, a common experience in many countries. The method represents an efficient information processing rule—using only and all information available. It allows incorporating errors in variables, inequality constraints, and prior knowledge about any part of the SAM. An example is presented applying the CE approach to data from Mozambique, using a Monte Carlo approach to compare the CE approach to the standard RAS method and to evaluate the gains in precision from utilizing additional information.
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- John Freebairn & Bill Griffiths, 2006. "Introduction," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages 1-1, 09.
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- Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers Archive 1488, Iowa State University, Department of Economics.
- McDougall, Robert, 1999. "Entropy Theory and RAS are Friends," GTAP Working Papers 300, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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