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Multiplier Decomposition, Poverty and Inequality in Income Distribution in a SAM Framework: the Vietnamese Case

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  • Pansini, Rosaria Vega

Abstract

The aim of this paper is to show how and why is possible to assess both direct and indirect effects of exogenous income injections on mean income of different household groups using a new approach based on the decomposition of SAM-based multipliers. The approach we propose in this paper allows analyzing the level of inequality in the distribution of income linking the formation of individual/family income to the features of each country’s productive structure and it can be used both for structural analysis and for simulations of redistributive and antipoverty policies. The first step in order to link changes in the level of poverty and inequality to policy measures will be to derive the “accounting price multipliers matrix”, which allows considering the effects of policies affecting the labour market, thus changing the level of wages for different workers ‘categories. Using the traditional Pyatt and Round’s multiplicative decomposition method, we will be then able to disentangle the transfer, the open-loop and the closed-loop effects of a change in the income of exogenous SAM’s accounts. The second step will be to use a new technique introduced by Pyatt and Round (2006) to further decompose each element of the total multiplier matrix in order to enlighten in “microscopic detail” the linkages between each household group’s income of and other accounts whose income has been exogenously injected (i.e. Activities account and Factors account). Moreover, this new approach allows assessing the linkages between each household endowment in terms of factors and the features of the productive system and shading light on the most powerful links among different components of the economic system affecting the distribution of income. The empirical results obtained using the Vietnamese SAM for year 2000 show that the highest direct effects are related to exogenous injections to the agricultural sector and to less skilled labour force and that these effects involved not only on rural male headed but also other household groups. At the same time, the new type of multiplier decomposition shows which are the sectors and factors of production whose increase in income will have the greater indirect effects, increasing also the level of income of all household types. For example, investing in the sector of food processing and on female labour force will benefit the most all household groups, thus representing a policy option good for aggregate growth and for improving the distribution of income.

Suggested Citation

  • Pansini, Rosaria Vega, 2008. "Multiplier Decomposition, Poverty and Inequality in Income Distribution in a SAM Framework: the Vietnamese Case," MPRA Paper 13182, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13182
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    References listed on IDEAS

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    1. Francois Bourguignon & Luiz A. Pereira da Silva, 2003. "The Impact of Economic Policies on Poverty and Income Distribution : Evaluation Techniques and Tools," World Bank Publications - Books, The World Bank Group, number 15090.
    2. Graham Pyatt, 2001. "Some Early Multiplier Models of the Relationship between Income Distribution and Production Structure," Economic Systems Research, Taylor & Francis Journals, vol. 13(2), pages 139-163.
    3. Pyatt, F Graham & Round, Jeffery I, 1979. "Accounting and Fixed Price Multipliers in a Social Accounting Matrix Framework," Economic Journal, Royal Economic Society, vol. 89(356), pages 850-873, December.
    4. Hayden, Carol & Round, Jefferey I., 1982. "Developments in social accounting methods as applied to the analysis of income distribution and employment issues," World Development, Elsevier, vol. 10(6), pages 451-465, June.
    5. Jeffrey Round, 2003. "Constructing SAMs for Development Policy Analysis: Lessons Learned and Challenges Ahead," Economic Systems Research, Taylor & Francis Journals, vol. 15(2), pages 161-183.
    6. Bottiroli Civardi, Marisa & Targetti Lenti, Renata, 1988. "The distribution of personal income at the sectoral level in Italy: A SAM model," Journal of Policy Modeling, Elsevier, vol. 10(3), pages 453-468.
    7. Tarp, Finn & Roland-Holst, David, 2002. "Household Income Determination in Vietnam: A Structural Analysis with Implications for Market Reform," MPRA Paper 29416, University Library of Munich, Germany.
    8. Pyatt, Graham & Round, Jeffrey I, 1977. "Social Accounting Matrices for Development Planning," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 23(4), pages 339-364, December.
    9. Graham Pyatt & Jeffery I. Round, 2006. "Multiplier Effects and the Reduction of Poverty," Economic Studies in Inequality, Social Exclusion, and Well-Being, in: Alain Janvry & Ravi Kanbur (ed.), Poverty, Inequality and Development, chapter 0, pages 233-259, Springer.
    10. Alain Janvry & Ravi Kanbur (ed.), 2006. "Poverty, Inequality and Development," Economic Studies in Inequality, Social Exclusion, and Well-Being, Springer, number 978-0-387-29748-4, December.
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    Cited by:

    1. Mbanda, Vandudzai & Bonga-Bonga, Lumengo, 2018. "Impacts of Public Infrastructure Investment in South Africa: A SAM and CGE-Based Analysis of the Public Economic Sector," MPRA Paper 90613, University Library of Munich, Germany.
    2. Julius Mukarati & Makombe Godswill, 2016. "Modeling The Distributive Effects Of An Agrciultural Shock On Household Income In South African: A Sam Multiplier Decomposition And Structural Path Analysis," EcoMod2016 9216, EcoMod.
    3. Edirisa Nseera, 2014. "Working Paper 206 - Growth and Distributional Impact of Agriculture, Textiles and Mining Sectors in Lesotho," Working Paper Series 2137, African Development Bank.
    4. Julius MUKARATI & Godswill MAKOMBE, 2017. "Modeling the Distributive Effects of an Agricultural Shock on Household Income in South Africa: A Sam Multiplier Decomposition and Structurel Path Analysis," Journal of Economics Bibliography, KSP Journals, vol. 4(1), pages 43-55, March.
    5. Edirisa Nseera, 2016. "Working Paper 242 - Understanding the prospective local content in the petroleum sector; and the potential impact of high energy prices on production sectors and household welfare in Uganda," Working Paper Series 2350, African Development Bank.
    6. Silvana Mondlane & Dirk van Seventer, 2019. "Agricultural development, trade, and income distribution: A 2015 social accounting matrix multiplier decomposition approach for Mozambique," WIDER Working Paper Series wp-2019-77, World Institute for Development Economic Research (UNU-WIDER).
    7. Azharia ELBUSHRA & Ibrahim EL-DUKHERI & Dr. ALI A. SALIH & Raga ELZAKI, 2010. "SAM-Based Accounting Modeling and Analysis - Sudan 2000," EcoMod2010 259600049, EcoMod.

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    More about this item

    Keywords

    Income distribution; social accounting matrix; multiplier decomposition; growth; labour market; structure of production;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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