Graham Pyatt was an influential quantitative development economist. He made significant contributions in the fields of social accounting and policy modelling, and in poverty analysis especially. The aim of this paper is to chart and assess his pioneering contribution in designing and applying social accounting matrices (SAMs) in developing countries. He led projects to construct SAMs for Sri Lanka, Swaziland and Malaysia with progressively improved features. Based on the structure of a SAM he developed both fixed and flexible price models, including multiplier decompositions used in examining the relationships between the structure of production and income distribution. Graham Pyatt also contributed insights into the fundamentals of social accounting including accounting for time use. The paper also highlights his inspiration in developing formal methods of reconciling data from disparate data sources; and in devising the transactions value (TV) approach to construct a CGE model based on a SAM format.
Graham Pyatt and his collaborators introduced new ways of exploring the structure and functioning of economies through the use of social accounting matrices. This paper focuses on the measurement and impact of alternative measures of income formation; Pyatt’s systems made an important distinction between factor and institutional income that has become an increasingly important issue in the measurement of income inequality. Some recent developments will be explored, with a focus on the work of Miyazawa whose concept of the interrelational income multiplier matrix embraced part but not all of Pyatt’s attention to income dynamics. The paper provides some recent extensions to these initiatives.
This paper honors Graham Pyatt’s contributions to distributional analysis and his pioneering quantitative methodology that integrates macroeconomic and microeconomic approaches. Bridging macro- and microeconomic models to understand the incidence of macroeconomic shocks and policies or the aggregate impacts of scaling up micro interventions is crucial in today’s politically polarized context. Obstacles to this integration, including data limitations, differing theoretical foundations, and professional silos, are identified, and methodological approaches to linking macro and micro models, organized by model nature – static or dynamic, perfect competition or market imperfections – and linkage methods: top-down, bottom-up, or looping are reviewed. The Global Income Distribution Dynamics model is highlighted as an advanced dynamic microsimulation model. Two examples illustrate the practical applications of these methodologies: the impact of education expansion on global inequality and the distributive impact of the Panama Canal enlargement. These dynamic macro-micro modeling approaches demonstrate the deep insights gained by building on Pyatt’s legacy.
Following the seminal Pyatt’ contributions to modeling, the paper shows how a SAM can be used for assessing the effects on the households personal distribution of income of alternative policies directed to changing the ownership of factorial income. The decomposition of the “core” matrix of a very simplified SAM, that links households incomes to the factors ownership, is the first step for linking functional to personal income distribution and for modeling changes in factorial ownership. The relevance of the multiplier approach will be illustrated with one numerical example referred to the Italian economy. The main finding is that the inequality in the personal income distribution is strictly connected with the functional one. Because of the features of the production structure and of the ways of spending the benefits originating from an initially equal increase in disposable income across population deciles increasingly favor the upper-middle income deciles, particularly the top ones.
The System of National Accounts (SNA) and the evolution of satellite accounts allowed the development of increasingly realistic and disaggregated macroeconomic models for policy design. The Social Accounting Matrix (SAM), the sophisticated tool within SNA, provides the integration of non-economic and territorial elements into the circular flow of income. As economic policy objectives are often broad and interact with social factors, such as household types and territorial characteristics, the SAM represents a valuable database for the policy maker, being able to capture the complexity of modern economies, both in aggregate and disaggregated terms. Extended multisectoral models based on SAMs offer detailed insights, revealing the interrelationships among industries, primary factors and institutional sectors. These models recently gained renewed attention for analysing policy impacts, especially in contexts like environmental policies, natural disasters, and pandemics.
This study estimates the socio-economic impact of investments related to the Institutional Development Contract (CIS) for the city of Taranto on different categories of households, labor markets and firms in Italy using a multiregional SAM model (MR-SAM) with interregional trade. The study concludes that about 28% of the total impact is cross-regional. Around 37 % of the interregional impacts are attributable to the regions near Apulia in southern Italy, 25 % to the regions in central Italy and 38 % to the regions in the north. The study suggests that the analysis of the impact considering only the area where the investment is developed as an island detached from the whole economic system can be misleading as it does not provide information on the spread of the impact outside the administrative boundaries of the local economy.
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