Pyatt and Round: Accounting and Fixed Price Multipliers in a SAM Framework

Pyatt, Graham and Jeffery I. Round. (1979). Accounting and Fixed Price Multipliers in a Social Accounting Matrix Framework (Vol. 89, 850-873): Blackwell Publishing for the Royal Economic Society.

“This paper is concerned with the relationships between output, factor demands and income, and the decomposition of these relationships into separate effects as suggested by the structure of a social accounting matrix representation of flows between them” (850). This SAM will be able to describe the behavior between three different matrices in one matrix.

“Factors of production receive income from domestic production…which in turn is distributed to households and companies…and as net factor income payments from abroad…Factor incomes received by households include wages, unincorporated business profits, and rent on dwellings…but households also receive distributed profits from the corporate sector…and transfers from government…before arriving at total household income. Similarly, corporate enterprises receive factor incomes in the form of gross profits…as well as current transfers from government…government income is derived from direct tax payments and other transfers by households…corporate enterprises…and from the rest of the world…as well as intra-government transfers…together with net indirect tax payments…shown as a receipt from a special indirect tax account. The expenditures on domestically produced commodities are shown in the row of account 4. They include outlays by household…government…investment…and the rest of the world…as well as intermediate transactions between production activities…Indirect taxes on all of these expenditures, and purchases of imported goods, are shown as separate outlays by the various spending units. …Finally, outlays on domestic investment…are matched by domestic and foreign savings…where the later…is the final balancing item in the rest of the world accounts” (854-4).

”To move from a SAM to a model structure requires that each account should be designated as endogenous or exogenous” (855).