ALTERNATIVE APPROACH TO ECONOMIC RESTRUCTURING TO BENEFIT THE POOR – SAM MULTIPLIERS ANALYSIS AS ALTERNATIVE APPROACH

Sanjaya ACHARYA, Marcello SIGNORELLI, Borut VOJINOVIC, Zan Jan OPLOTNIK

Abstract


Many economic reforms in developing economies are, in fact, price deregulation in the product markets and trade liberalisation, concerning whether the growth of exports accelerates. This paper, however, attempts to offer a new flavour in the policy reforms using fixed price model to study the growth impact of different sectoral investments and transfers to households. We used Social Accounting Matrix (SAM) multipliers to analyse the flow structure and distributional effects of sectoral investments and transfers in a typical developing economy. Using the case of Nepal we simulate the effects of additional demand creations to sectors and transfer earning growth to households and measure their effects and conclude that in the given flow structure, the additional sector demand and transfer growth in the economy benefit the middle income groups more; whereas the benefit to the poorest is only modest. We examine the effects of potential pro-poor economic restructuring measures especially with regard to the improvements of efficiency parameters and redirection of factor endowments. Consequently, poor households transfer towards those activities which have higher multiplier effects of additional demand and transfer earning. Furthermore, redirection of factor endowments requires undergoing with the skill upgrade of poor labour to be conducive with higher economic growth.

Full text: PDF

Keyword(s)


economic restructuring, social accounting matrix (SAM), economic growth, developing economies

JEL Codes


D63, E65, F43, O20

References


Acharya, S. and Cohen, S., 2008. Trade Liberalisation and Household Welfare in Nepal. Journal of Policy Modeling, 30(6), pp. 1057-1060.

Acharya, S., 2007. Flow structure in Nepal and benefit to the Poor. Economics Bulletin, 15(17), pp. 1-14.

Acharya, S., 2006. Pro-poor Growth and Liberalisation: CGE Policy Modelling for Nepal. Erasmus School of Economics, Erasmus University Rotterdam, The Netherlands.

Blanchard, O. and Kremer, M., 1997. Disorganization. Quarterly Journal of Economics, 112, pp. 1091–1126.

Byrd, W. A., 1991. The Market Mechanism and Economic Reforms in China. Armonk, N.Y.: Sharpe.

Cohen, S. I., 1988. A Social Accounting Matrix Analysis for the Netherlands. De Economist Summer 136(2), pp. 253-272.

Cohen, S. I., 2002. Social Accounting for Industrial and Transition Economies: Economy-wide Models for Analysis and Policy. Hampshire, UK: Ashgate Publishing Limited.

Echevarria, C., 1997. Changes in Sectoral Composition associated with economic growth. International Economic Review, 38(2), pp. 431- 452.

Jozef, K. and Walsch, P. P., 1999. Disorganization in the Process of Transition. Economics of Transition, 7(1), pp. 29-46.

Lau, L. J., Qian, Y. and Roland, G., 2000. Reform without Losers: An Interpretation of China’s Dual-Track Approach to Transition. Journal of Political Economy, 108(1), pp. 120-143.

Lau, L. J., Qian,Y. and Roland, G., 1997. Pareto-Improving Economic Reforms through Dual-Track Liberalization. Economic Letters, 55, pp. 285–92.

Li, W., 1999. A Tale of Two Reforms. Rand Journal of Economics, 30, pp. 120–36.

Lin, J. Y., 1992. Rural Reforms and Agricultural Growth in China. American Economic Review, 82, pp. 34–51.

Lin, J. Y, Cai, F. and Li, Z., 1996. The Lessons of China’s Transition to a Market Economy. Cato Journal, 16, pp. 201–31.

McMillan, J. and Naughton, B., 1992. How to Reform a Planned Economy: Lessons from China. Oxford Review of Economic Policy, 8, pp. 130–43.

Murphy, K. M., Shleifer, A. and Vishny, R. W., 1992. The Transition to a Market Economy: Pitfalls of Partial Reform. Quarterly Journal of Economics, 107, pp. 889–906.

Palmer, R., 2007. Skills for work?: From skills development to decent livelihoods in Ghana's rural informal economy. International Journal of Educational Development, 27(4), pp. 397 – 420.

Rogerson, C.M., 2002. Urban economic restructuring: the changing SMME economy of inner city Johannesburg, in: R. Donaldson and L. Marais (eds), Transforming Rural and Urban Spaces in South Africa During the 1990s: Reform, Restitution and Restructuring, Africa Institute of South Africa, Pretoria, pp. 333-360.

Roland, G. and Verdier T., 1999. Transition and the Output Fall. Economic Transition, 7(1), pp. 1–28.

Sicular, T., 1988. Plan and Market in China’s Agricultural Commerce. Journal of Political Economy, 96, pp. 283–307.

Vélez, F. J. de M. and Pérez-Mayo, J., 2006. Linear SAM models for inequality changes analysis: an application to the Extremadurian economy. Applied Economics, 38 (20), pp. 2393 – 2403.

Wu, J. and Zhao, R., 1987. The Dual Pricing System in China’s Industry. Journal of Comparative Economics, 11, pp. 309–18.

Zhang, W. and Yi, G., 1995. China’s Gradual Reform: A Historical Perspective. Manuscript. Beijing: Peking University.