Graham Pyatt

On the interpretation and disaggregation of GINI coefficients

Problems of inequality related to the disaggregation of Gini coefficients are examined. Measures of inequality can be decomposed so that in a grouped population, total inequality depends on inequality within and between groups. No such decomposition is available for the Gini coefficient, yet its direct relationship to the Lorenz curve has resulted in persistent attempts to derive a disaggregation that can be used in empirical work. The Gini coefficient can be interpreted in terms of the average expected gain from having the option of receiving the income of some other random individual. Variation within the components of the expression for the Gini coefficient contributes to overall inequality. The decomposition of the Gini coefficient further identifies the inequality within a population and may have particular relevance to studies of migration and discrimination. If migration includes movement from one income group to another or a change in educational status, the migration can be viewed in terms of expected gains for those individuals who are migrating. These expected gains for individuals can then be considered in terms of a statistical game framework. Statistical data are included. 12 references.

The distribution of income by factor components

This paper furthers the discussion of income inequality decomposition by focusing attention on the problems which arise in this context when available data are restricted to the distribution of factor incomes between groups of families defined by their total income level. First, it sets out the Rao (1969) decomposition of the Gini coefficient for total income in terms of factor shares and factor concentration ratios. Further decomposition of concentration ratios into rank correlation ratios and factor Ginis is recommended when individual data are available. Second, interpretation of concentration ratios as Gini coefficients is shown to be misleading. An analogue in economic theory is required. The results obtained required exploration of the alternative concepts and measurements which are possible when individual family data are available. In turn, these had to be related to the more limited set of concepts which can be calibrated when available data are taken from a secondary source. Caution is advised in interpreting results based on secondary sources of income inequality by factor components.

A SAM approach to modeling

Given that there is an accounting system corresponding to every economic model, it is useful to make the accounts explicit in the form of a social accounting matrix (SAM). Such a matrix can be used as the framework for a consistent data set and for the representation of theory in what is called its transaction value form. The SAM approach to modeling is to integrate these alternative versions of the matrix. It is discussed here primarily in relation to macroeconomic general equilibrium models and their simpler antecedents.

Fundamentals of Social Accounting

A series of social accounting matrices (SAMs) are developed in this paper from first principles. Starting with the basic concepts of an institution, real assets and financial claims, the notions of a transaction and production are introduced, and it is shown that a SAM can be developed from the fundamental transactions identity. Accounts for real assets and financial claims are then grafted on to this initial SAM by reference to a similarly fundamental assets identity. Hence, a fully articulated SAM framework is developed which covers institutions, production, assets and their appreciation.

Macroeconomic modeling based on social-accounting principles

Abstract Using the example of a small comparative static model of Thailand for 1980, this article sets out an approach to macroeconomic model building that is based on two versions of a social-accounting matrix (SAM)—one version contains data for a base year, whereas the cell entries of the other are algebraic expressions for the determination of the corresponding transaction values. Thus the model is developed in transaction-value (TV) form, and this is one distinguishing feature of the approach. Other features derive from different aspects of the relationship between the two SAMs. We argue that the approach has distinct advantages for model description, calibration, and solution and that these are important if models are to be used for policy purposes that place a premium on intelligibility and replicability within the context of a flexible modeling capability.

Some Relationships between T-Accounts, Input–Output Tables and Social Accounting Matrices

Some relationships between the T-accounting format for presenting commodity balances; input-output (IO) tables; and social accounting matrices are discussed in this paper. The starting point is to recognize that IO tables do not contain all the information that is needed to complete a social accounting matrix (SAM), or, therefore, for the modelling of phenomena that depend on having a fully articulated SAM, such as the interdependence of the distribution of income and the structure of production. There is a need, therefore, to establish the character of the extra information that is required and this can be achieved by imposing the requirement that a SAM should be consistent with the basic cash identity that is fundamental to all social accounting. A second agendum is to develop the argument that, while T-accounts can, in principle, provide a database equivalent to that of a SAM, in practice, they are typically found to be an imperfect substitute. It is important, therefore, in designing a database, to go beyond the confines of an (extended) IO system and T-accounts. SAMs provide an appropriate framework for doing so.

Some Early Multiplier Models of the Relationship between Income Distribution and Production Structure

Early efforts to endogenize consumption and hence to model the inter-relationships between production structures and income distribution via multiplier models are reviewed in this paper. It is suggested that, unlike the multipliers in Pyatt et al. (1973), the so-called Miyazawa multipliers cannot be sustained in the context of a model of the distribution of income among institutions (households, companies, etc) i.e. the institutional distribution of income. They can, however, be sustained within a model of the distribution of income among factors, i.e. the factorial distribution of income. Both distributions are modelled by Pyatt & Round (1979) which therefore provides a more general framework for analysing the relationship between the distribution of income and the structure of production.

Measuring Welfare, Poverty and Inequality

A class of poverty measures is identified, the members of which satisfy strong monotonicity and transfer conditions. These measures are closely related to indices of income inequality based on the notion of a mean-equivalent income. A restriction on the class of admissible measures allows poverty to be interpreted in terms of the loss in mean-equivalent income resulting from the fact that some people are poor. Copyright 1987 by Royal Economic Society.

DEVELOPMENT AND THE DISTRIBUTION OF LIVING STANDARDS: A CRITIQUE OF THE EVOLVING DATA BASE

Household surveys of the distribution of income and expenditure are discussed in this paper. The potential for non-sampling errors, effecting both the mean and measures of dispersion, is noted. These errors are shown to result in substantial discrepancies between the survey data and national accounts-based estimates of the incidence of poverty and trends in living standards. It is argued that the reconciliation of these discrepancies offers the best way forward for improving both types of data.

Social Evaluation Criteria

Over the years a large literature has accumulated in which various alternative measures of income inequality and poverty are proposed. However, the empirical application of these ideas has tended to lag behind their conceptual development, with the result that it is not immediately evident which of the theoretical possibilities to adopt when trying to analyse data and to extract a coherent story based on actual comparisons over time and space. This paper is an attempt to respond to the need for practical suggestions as to what to do. It leads firstly to the suggestion that comparisons over time or between different groups of households should be based on what is known as the generalised Lorenz curve. In this the present conclusions have the support of Shorrocks (1983) who provides a rigorous source for many of the arguments to be referenced here. This work does not go far enough, however, in addressing some of the practical problems which arise when comparisons are to be made over time and space, and when households of miscellaneous composition have to be compared. The construction of a generalised Lorenz curve in these circumstances is evidently a more difficult matter. It calls for further developments along lines which have previously been suggested in Pyatt (1980) and Willig (1981). These, then, provide the ultimate objective in this paper.