Iowa State University Capstones, Theses and Retrospective Theses and Dissertations Dissertations 1965 Design and use of social accounting systems in state development planning Jerald Raymond Barnard Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/rtd Part of the Economics Commons Recommended Citation Barnard, Jerald Raymond, "Design and use of social accounting systems in state development planning" (1965). Retrospective Theses and Dissertations. 3329. https://lib.dr.iastate.edu/rtd/3329 This Dissertation is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository. It has been accepted for inclusion in Retrospective Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. This dissertation has been micro&hned exactly as received 66-3851 BARNARD, Jerald Raymond, 1933- DESIGN AND USE OF SOCIAL ACCOUNTING SYSTEMS IN STATE DEVELOPMENT PLANNING. Iowa State University of Science and Technology Ph.D., 1965 Economics, general University Microfilms, Inc., Ann Arbor, Michigan DESIGN AND OSE OF SOCIAL ACCOUNTING SYSTEMS IN STATE DEVELOPMENT PLANNING by Jerald Raymond Barnard A Dissertation Submitted to the Graduate Faculty in Partial Fulfillment of The Requirements for the Degree of DOCTOR OF IHILOSOPHY Major Subject: Agricultural Economics Approved; Signature was redacted for privacy. In Charge of Major Work Signature was redacted for privacy. Signature was redacted for privacy. Iowa State University of Science and Technology Ames, Iowa 1965 ii TABLE OF CONTENTS INTRODUCTION 1 The Iowa Economy 3 State and Area Planning 4 Ifeture of the Problem 5 Objectives of the Study 6 INFORMATION NEEDS FOR STATE ECONOMIC PLANNING 8 Income and Product Accounts 11 Input-Output Analysis 17 Flovr-of-Funds Accounts 25 National Balance Sheets 28 Balance-of-Payments Accounts 29 Interrelations of Social Accounts 30 Comprehensive Social Accounting Systems 32 Accounts and Model Building 34 SOCIAL ACCOUNTING SYSTEMS 37 Description of Iowa SAM 39 Categories of the fbtrix 43 Class 1, industries current accounts 43 Class 2, consumers' current accounts 46 Class 3» government current accounts 46 Class 4, indirect tax accounts 47 Class 5t institutions current accounts 48 Class 6, industries capital accounts 48 Class 7f consumers' capital accounts 49 iii Class 8, government capital accounts 4-9 Class 9» institutions capital accounts 49 Class 10, rest-of-world accounts 50 Iowa SAM for I96O 5I Secondary vs. survey data 52 Presentation of data 60 Class 1, industries current outlays 60 Class 2, consumers' current outlays 72 Class 3» government current outlays 76 Class 4, indirect tax outlays 79 Class 5» institutions current outlays 80 Class 6, industries capital outlays 89 Class 7» consumers' capital outlays 92 Class 8» government capital outlays 95 Class 9. institutions capital outlays 97 Class 10, rest-of-world outlays 101 State Income and Aroduct IO5 Aggregated social accounting matrix IO5 Income and product account IO7 MODEL CONSTRUCTION 110 Technical Relations 111 Input-output model 111 The production function _ - 111 Input-output coefficients 114 Interdependency coefficients 114 Capital coefficients II9 iv Labor productivity coefficients 124 Behavioral Relationships 125 Consumer demand 125 Labor force participation 129 Government Functions I33 Regional Trade I37 Computer Itodel I38 Cycle of calculations I39 Equations of model 140 Personal income, consumption, and saving l40 Consumer expenditures 142 Government expenditures 143 Exports 144 Final demand and projected output 144 Industries current and capital accounts 146 Employment, labor-force, and population 14? FORTRAN program 148 EMPIRICAL RESULTS 149 Rramework for Evaluation of Results 149 Estimated Final Demands I51 Consumers' expenditures I51 Government expenditures I5I Exports and competitive impwts 15I Results of Run 1 154 Social accounting matrix 1975 154 Incane and product 1975 154 V Comparison of Computer Runs I63 Projected output 166 Industries capital expenditures I69 Employment I69 Labor force and population I74 Public Program Implications lylj, SUMMARY AND CONCLUSIONS I77 LITERATURE CITED 182 ACKNCMLEDQEMENTS 188 APPENDIX A 189 1 INTRODUCTION The need for comprehensive economic analysis at the state and regional level for private and public planning is presently gaining much attention. Questions frequently raised by industry and government are: Vihat future level of population and economic activity should we assume as a basis for our investment decisions? VQiat changes are taking place in the population and economy of the state, region, or nation, and what are the implications of these changes for a particular geographical area? What are the probable effects of different governmental programs—state, local, or federal—on a particular industry or area? Andrews points out that recent trends in planning thought and national policy place the state as an effective planning agent between the area and region (2, p. 263). The state is a logical planning unit in that it has legislative and fiscal power enabling it to carry out a compre­ hensive plan at the sub-national level of public administration* Planning, as it is used in this study, includes both the analysis of economic data and information, and their synthesis as a basis for de­ veloping alternative programs of action. Conqprehensive state development planning in terms of the public sector of the state economy is viewed as adopting a policy to promote an environment favorable to state economic growth. The "favorable environment" may take such forms as providing social capital, such as investment in education, highways, or recrea­ tional facilities; providing assistance to the private sector i)i research and development as well as information for adjusting to institutional and 2 economic change; providing a system of technical coordination for the implementation of the physical and economic plans of the state; and pro­ viding a program of tax and other administrative reform where needed» Andrews contends that as urban areas grow and require more intensive and extensive levels of development of their resources, and as the rural regions undergo increasingly drastic employment and population contraction, the need for comprehensive economic planning becomes more urgent (1, p. 144). Planning may spell the difference between an antagonizingly long adjustment process and relatively swift and efficient adjustment. Without adequate economic information and planning, needed adjustments may not occur in either rural backwash areas or the urban areas growing in a rapid chaotic fashion. Economic analysis for state planning is concerned with economic change and growth. It is concerned, also, with the preparation and use of information to stimulate area economic growth in the face of stagnation or decline, or to deal with an area economy which is growing so rapidly that the public and private sectors cannot adequately meet the demands placed upon them. To better understand the state economy, a system of economic accounts is presented that shows, as a basis for comprehensive state planning, the intersectoral transactions taking place in a given time period. These accounts show what has taken place in a historical period in a way that increases our insight into the economic processes. Even a simple inspec­ tion of the data provides information on certain structural properties of an economy which are essential and useful. For example, even the more aggregate concepts, such as gross state product, gross private investment. 3 balance-of-trade, personal income, and employment, provide an indication of how well a state econongr is doing. Even a rough quantitative picture of an economy is quite helpful in economic analysis. For this reason, the Itoited Nations Committee on National Accounts has urged that social accounting studies should be undertaken, even if in the short-run they cannot be expected to obtain a high degree of quantitative precision (57. p. 2). The Iowa Economy The Iowa economy has not faired too well in recent years when com­ pared with other states. Growth in employment and personal income, two important indicators of state well-being, show Iowa's growth lagging behind the national averages (3, 13). Although Iowa's per capita income has been increasing, it has remained relatively stable at only 90 percent of the national average. The decline in Iowa's share of es^loyment and personal income is mainly the result of agricultural change. The rapid gains in productivity in agriculture has forced a drastic contraction in employment in Iowa's basic industry. ]jicreased per capita income has been possible only by movement out of agriculture and, in many cases, migration out of the state in search of new eB^loynent opportunities. The impact of agricultural change upon employment in Iowa resulted in an estimated increase of only 21,200 workers from 1950 to 1964^. Popu­ lation also increased at a slow rate—by only 154,000 ffom 1950 to 1964. Rapid increases in productivity relative to demand in transportation and 4 related activities have also contributed to employment decline and popu­ lation loss. Althou^ per capita incomes have increased in Iowa, internal adjust­ ments have brought hardship to many and a host of difficult problems yet to be solved. If expansion of non-agricultural industries had been sufficiently great over the past