Erik Thorbecke

STRUCTURAL PATH ANALYSIS AND MULTIPLIER DECOMPOSITION WITHIN A SOCIAL ACCOUNTING MATRIX FRAMEWORK

The main purpose of this paper is to apply structural path analysis to a Social Accounting Matrix (SAM) framework. Because the SAM is a comprehensive essentially general equilibrium -data system, the whole network through which influence is transmitted can be identified and specified through structural path analysis. The latter provides an alternative and much more detailed way to decompose multipliers as compared with the traditional treatment of Stone (1978) and Pyatt and Round (1979). This paper consists of five sections. The first one reviews the SAM framework as a basis for multiplier analysis and multiplier decomposition. In particular, the additive decomposition in terms of transfer, open-loop and closed-loop effects is succinctly presented. Section II applies this conventional decomposition to a SAM of South-Korea to illustrate with eleven specific cases the effects of an exogenous injection on the endogenous accounts of the SAM, i.e. the incomes, of the factors, household groups and production activities. Section III is devoted to the presentation of the elements of structural analysis and, more particularly, the transmission of economic influence within a structure. Finally, Section IV applies structural path analysis to the South-Korean SAM and compares and contrasts the multiplier decomposition which it yields, with the alternative decomposition discussed in Section II. The comparison is the more significant in that the two decomposition methods are applied to the same eleven selected cases spanning a variety of sectors (i.e. poles) of origin (for the injection) and sectors (poles) of destination. The empirical analysis in Section IV suggests that structural path analysis applied to a SAM is a potentially operationally useful technique within which a whole series of policy issues can be addressed. The final section is devoted to a brief summary and conclusions.

Economic Inequality and Its Socioeconomic Impact

Abstract Income inequality is of fundamental interest not only to economists, but also to other social scientists. A substantial literature in economics and the social sciences has investigated the relationship between income inequality and economic growth, and a variety of social phenomena. The links between inequality and economic growth are explored as well as those between inequality and such key social variables as political conflict, education, health, and crime. The analysis in this paper follows a two-step process. First, a review of the empirical evidence relating inequality to growth and to each of the above social variables is undertaken. Second, the various causal mechanisms that have been proposed in the social science literature to explain those links are surveyed.

The impact of public education expenditure on human capital, growth, and poverty in Tanzania and Zambia: a general equilibrium approach

The impact of public education expenditure on human capital, the supply of different labor skills, and its macroeconomic and distributional consequences is appraised within a multisector CGE model. The model is applied to and calibrated for two Heavily Indebted Poor Countries (HIPCs), Tanzania and Zambia. The simulation results suggest that education expenditure can raise economic growth. However, to maximize benefits from education expenditure, a sufficiently high level of physical investment is needed, as are measures that improve the match between the pattern of educational output and the structure of effective demand for labor. An important result of the simulation experiments is that a well-targeted pattern of education expenditure can be effective for poverty alleviation.

A methodology for measuring food poverty applied to Kenya

Abstract This paper proposes a new way of establishing a food poverty line taking into account regional food preferences and prices. It uses this poverty line to derive a food poverty measure which satisfies the desirable fundamental properties of such measures and has the additional advantage of being additively decomposable. The measurement of food poverty is further generalized to heterogeneous groups of households facing different sets of relative prices and exhibiting different food preferences. Finally, the above methodology is applied to the empirical estimation of food poverty among Kenyan smallholders, and the results contrasted with those obtained by two other methods.

A multiplier decomposition method to analyze poverty alleviation

Abstract The objective of this paper is to present a multiplier decomposition method focusing on poverty alleviation. The decomposition captures the various mechanisms and linkages through which a production sectors output contributes to poverty alleviation within a socioeconomic system represented by a Social Accounting Matrix (SAM). It is shown that a multiplier can be broken down into two multiplicative effects, the distributional and interdependency effects. The decomposition method is applied to the case of Indonesia. A key policy implication is that the human capital of the poor needs to be enhanced if they are not to be sealed off from the industrialization process.

Adjustment, growth and income distribution in Indonesia

During the decade of the 1970s and until 1982 the growth performance of the Indonesian economy was very good, with GDP growing at 7.2 percent per annum. Oil exports provided the major engine of growth for the entire economy during that period. In addition, within agriculture, growth was fueled by the boom in paddy production which converted Indonesia from the largest rice importing country in the world to virtual self-sufficiency by the mid-1980s (paddy production increased at an annual rate of 7.1 percent between 1978–80 and 1983/4). The two oil price booms of 1973, and more particularly 1979, fueled a major expansion of the economy which lasted until the crisis. The predominant role of the oil sector is clearly revealed by recalling that earnings from crude oil and petroleum products accounted for two-thirds of all export earnings, one-fourth of total GNP and 70 percent of government domestic revenues in 1982. Oil prices peaked in 1982 and revenues from this sector started to contract, reducing drastically the basis and prospects for economic growth.

District-level economic linkages in Kenya: Evidence based on a small regional social accounting matrix

Abstract This paper explores the nature and extent of the economic linkages in a small regional economy defined by a market center and its hinterland in Kenya. The analysis is based on a set of income and employment multipliers derived from a social accounting matrix estimated for the region. Issues considered include the impact of production activities on regional value added and employment; the influence of sectoral production on the level of household income and the impact of household expenditure on regional value added; and the relative significance of production and consumption linkages in terms of stimulating aggregate income. The above questions are examined under the assumption of complete excess capacity in regional production and under the assumption of supply constraints in agriculture. The usefulness of the analysis for district level economic planning is demonstrated.

A dual-dual CGE model of an archetype African economy: trade reform, migration and poverty

Abstract We build a CGE model of an archetype African economy to simulate the welfare effects of trade liberalization specifically on poverty. The economy is modeled following a dual-dual framework (Thorbecke, 1993, 1994, 1997) that is characteristic of the structure of a developing country in its middle development phase. This provides the basis for analyzing the distribution of modern and informal sector activities in both rural and urban areas. The interdependence of these four broadly defined sectors is modeled not only in terms of production and consumption decisions within them, but also in terms of labor migration among them, adding a richness which is missing in the standard CGE models. Poverty analysis is integrated in the CGE methodology by endogenizing both intra-group income distributions and the nominal poverty line. The application of standard poverty measures to the pre- and post-simulation poverty lines and distributions of income for each socio-economic group, allows the assessment of policy-induced changes on group specific poverty and national poverty. Simulations with a model calibrated from a social accounting matrix (SAM) of a prototype African economy, show that an important contribution of the dual-dual model vis-a-vis poverty analysis in a CGE model is the inter-group migration it incorporates. Changes in the population shares of the socio-economic groups that follow population shifts have important implications for the magnitudes of changes in national poverty.

Macroeconomic effects of technology choice: Multiplier and structural path analysis within a SAM framework

Abstract The direct and indirect macroeconomic effects of technology choice on income distribution and the level and composition of output and employment are analyzed within the framework of a Social Accounting Matrix (SAM). In six specific sectors the impact of the gradual substitution of traditional technologies by modern technologies in Indonesia is examined within a highly disaggregated SAM. Fixed price multiplier analysis reveals that the pattern of income distribution and employment is quite sensitive to the adoption of new techniques. Finally, structural path analysis shows the entire network of paths through which the impact of a particular technology is transmitted on the disaggregated socioeconomic system.

The Impact of Globalization on the World's Poor

PART 1: OVERVIEW Overview M.Nissanke & E.Thorbecke Channels and Policy Debate in the Globalization-Inequality-Poverty Nexus M.Nissanke & E.Thorbecke PART 2:THE GLOBALIZATION OPENNESS-GROWTH-INEQUALITY-POVERTY NEXUS AND CHANNEL The Relationship between Income Inequality, Poverty and Globalization A.Heshmati Globalization and Poverty Trends across Regions: The Role of Variation in the Income and Inequality Elasticities of Poverty A.Kalwij & A.Verschoor Looking Beyond Averages in the Trade and Poverty Debate M.Ravallion Globalization and Rural Poverty P.Bardhan Globalization, Production, and Poverty R.Jenkins PART 3: OTHER CHANNELS IN THE GLOBALIZATION-POVERTY RELATIONSHIP: TECHNOLOGY, VULNERABILITY, FLOW OF INFORMATION, INSTITUTIONS The Role of Information in Technology Adoption under Poverty J.Zhao Trade Openness and Vulnerability in Central and Eastern Europe P.Montalbano, A.Federici, U.Triulzi & C.Pietrobelli Globalization, Poverty, Inequality, and Insecurity: Some Insights from the Economics of Happiness C.Graham Explaining Threshold Effects of Globalization on Poverty: An Institutional Perspective A.Sindzingre Globalization, Poverty and Inequality: What is the Relationship? What Can be Done? K.Basu