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What Is a SAM? Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized SWP463 The views and interpretations in this document are those of the author and should not be attributed to the World Bank, to its affiliated organiza- tions, or to any individual acting kn their behalf. WORIl) Brn Staff Working Paper No- 463 June 1981 WRAT IS A SAM? A LAPMAN'S GUIDE TO SOCIAL ACCOUNTING MATRICES This paper is intended as an introduction for readers who have no previous familiarity with social accounting matrices. It assumes nothing more from the reader than a rudimentary knowledge of national income accounting. Starting f tom the simplest formlation, the paper introduces step by step many of the main features of a social accounting matrix in its fully developed and more complex form. An explanation is given of the relationship between social accounting matrices on the one hand and national accounts, input-output matrices and multipliers on the other. Prepared by: Benjamin 9. King Development Economics Department Development Policy Staff Copyright @ 1981 The World Bank 1818 H. Street, N.W. Washington, D.C. 20433, U.S.A. PREFACE This paper has its origin in a conference held in Cambridge, England in 1978, which was sponsored by the World Bank External Research Program under research project 671-27. The author was one of the two participants at that conference who did not belong to the "subculture" of practitioners and connoisseurs of SAMs or social accounting matrices. Graham Pyatt, who is responsible for the research project and who organized the conference, subsequently persuaded the author to write a guide to SAMs fcr the layman. The author's principal qualification was that he shared with his intended audience an almost complete ignorance of the SAM framework; without that ignorance he would never had. had the temerity to undertake such a task. Once it was launched, Graham Pyatt commented on each successive draft and edited extensively with good reason. Many useful comments were also made by Clive Bell, Alan Gelb, Sherman Robinson, Alan Roe and Jeffrey Round. The final product, as usual, remains the author's reluctant responsibility. Table of Contents Page No Introduction ..................................................... 1 A Primitive Example: the Robinson Crusoe Economy ................ 3 Sri Lanka 1970 ................................................ 6 Diagonal Entries ............................................ 11 Indirect Taxes ............................................... 12 Savings and Investment ....................................... 15 A General Framework .......................................... 18 An Input-Output Matrix ....................................... 27 Botswana 1974175: The Flow of Funds ............................. 31 Purchase and Sale of Assets .................................. 34 Decomposition of the Capital Account ......................... 36 Decouiposing the Financial Transactions ....................... 39 Decomposition of Institutions ................................ 41 The Uses of SAMs ................................................. 44 Learning by doing................................^.. 54 References ....................................................... 59 List of Tables .Table Count rv Page No . 1 Robinson Crusoecs Island .................................. 4 2 Sri Lanka An Initial Aggregate SAM ................... 7 3 Sri Lanka A Revised Aggregate SAM (including diagonal entries .............. 13 Sri Lanka Further Development of the Aggregate SAM (introducing indirect taxes)......... 14 Sri Lanka AFinal Aggregate SAM ...................... 16 Sri tanka A Partially Disaggregated SAM .............. 19 Sri Lanka Consolidated Accounts for the Nation .......21/22 Sri Lanka Reconciliatton Table ....................... 24 Sri Lanka Reconciliation Table ....................... 26 Sri tanka Complete Disaggregated SAM ................. 28 Sri Lanka Input-Output Matrix ........................ 30 Botswana An Aggregate SAM ........................... 33 Rot swana Introduction of a Ftnancial Account into the Aggregate SAM ................... 35 Botswana A SAM with Disaggregated Capital Accounts .............................. ... 37 Botswana Extending the SAM to Include Separate Accounts for Financial Assets............ 40 Botswana A Final SAY ................................ 42 Botswana Multiplier Effect in the Form of an Increnental SAX .......................... 48 Yemen Arab A Simple SP;M ............................... 55 Republic Introduction 1. A social accounting matrix, familiarly known as SAM to the limited fraternity familiar with it, has two principal objectives. The first is concerned with the organization of in£ormation, usually in£ormation about the economic and social structure of a country in a particular year, though it could as well be about a region in a country, a city or any other unit which one is interested in and the unit of time, though convenient, is arbitrary. Complaints about the inconsistency and unreliability of economic and social data in developing countries have reached the point of being trite. While there is justification in these complaints, they are not the whole story. There is of ten idormation, dispersed ,r fragmentary, which is not used for lack of a framework to make the maximum use of the available information and to pinpoint with greater accuracy and specificity than is usually done the salient gaps and inconsistencies. 2. Once the data in a particular country for a particular year have been organized in the form of a SAM, they present a static image which can reveal much about economic structure. Even so, the image is only a "snapshot." In order to analyze Row the economy works and predict the effects of policy intervenrions in order to change it, more is needed thnn just a stattc image. A model of the economy has to be created which can simulate the effects of interventions, far example. This is the second I objective of a SAM: to provide the statistical basis for creation of a plausible model. 3. The principle of a SAM is really nothing more than that of double entry bookkeeping. It is a series of accounts in each of which incomi~gs and outgoing. for income and expenditure in many cases) must balance. Furthermore, what is "incoming" into one accouct must be "outgoing" from another account. In this respect, a SAM resembles traditional national accounts. In fact, as will be demonstrated later, a SAM embodies the information normally included in national accounts and nuch more. In a SAM the double entries are achieved by only a single entry .in a matrix which resembles an oversized chessboard. Each account consists of one row across the board and one column down it, identically numbered. We shall explain how this works shortly. 4. How large the matrix is depends on the limitations of the available data and the motivation one has for constructing it. In principle, there is no limit to the fineness of detail. In practice, both the data and the effort available for constructing the SAM impose limita- tions. One of the original motivations for the elaboration of SAMs has been the growing interest in issues of poverty and basic needs. If one wishes to show how different actfvities affect or are affected by different socioeconomic groups in society, the amount of detail must correspond to the differentiation one wishes to make. 5. This paper does not attempt to examine the problems arising in the construction of SAMs nor the methods of economic analysis which use the assembled data. In other words, it is not addressed to specialists but to the broader audience of those who need an introduction to SAM'S. In the rest of the paper we shall proceed with simplified examples of SAMs, based on more elaborate ones published elsewhere. We shall start at the very simplest level with a purely imaginary economy and proceed by increasing size and complexity with examples of SAM'S worked out for real economies, Sri Lanka and Botswana. The reason for using two different vehicles, rather than carrying the reader non-stop on one, is that they illustrate the fact that SAM'S may be constructed in different gays--or, more properly, with different accents--for different purposes. Some points of interest FAY occur in one and others in a.r.=ther. A Primitive Examle: the Robinson Crusoe Economy 6 As an expository device, the Robinson Crusoe economy has perhaps become rather shopworn. Nevertheless, for want of something better, we shall use it again as a point of entry into the description of SAW+. We shall assume that Robinson engages in only one production activity, the picking of coconuts. In some given period, he picks 1,000 coconuts. This represents at the sane time the level of production, the level of his income and the level of his demand for products (sometimes called "wants"). All three are equal, as they must be in such an economy. 7. The structure of this economy is set out in Table 1, in which two columns and rows have been left blank because they are not being used for the time being. The final coluam and row around the border shav the total of each row or column. Within the border there are three entries, each of them equal to 1,000. These constitute the SAM for Robinson Crusoe- 8. In a SAM the rows represent incomings and the colucms outgoings. For example, Rw1 which is labelled "Income," receives 1,000 from Column 4 labelled "Production." In other words, Robinsones incosee derived from production and equals 1,000. Now, turning
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