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A Social Accounting Matrix:
How Is It Constructed?

A SAM can be described as a numerical representation of the economy with emphasis on its distributive aspects. It is a conceptual and numerical linkage of various kinds of related monetary and nonmonetary phenomena occurring in the economy and expressed in different measurement units. In the manner of the System of National Accounts (and its Input-Output framework), transactions in particular years appear in a matrix form showing receipts in the rows and outlays in the columns. A SAM shows how sectoral value-added accrues to production factors and their institutional owners; how incomes corrected for net current transfers are spent; and how expenditure on commodities leads to sectoral production and value-added. The leakages from this cycle — for example, in the form of payments abroad or savings — are also shown. In turn, capital finance may then be linked to savings, thereby presenting a glimpse of the dynamics of the economy. A SAM provides a data framework which reflects an actor/transaction view of the economy and supports disaggregated economy-wide modelling.

The inspiration for this kind of work owes much to two publications by Richard Stone (1971, 1985) in which he built a system of social and demographic statistics (SSDS and FSDS, Framework for Social and Demographic Statistics). At present, it is mainly used in the Netherlands; here, work is under way on socio-demographic accounts, socio-economic accounts and labour accounts.

Because the choices made at an early stage largely fix the options later on, it is advisable to evaluate the implications of various construction methods and the possible problems one may encounter in developing a SAM.

SAM is meant to fit into the existing national statistical infrastructure. Therefore,

• a SAM should be built on available data and should not require costly data collection (e.g., surveys):

  - an obvious advantage of the integration of various data sets into a comprehensive framework is the detection of data gaps and inconsistencies; but the more detail in a SAM the more possibility for inconsistencies, and especially in attempts to assign monetary values to nonmarket events (the case of social costs);

  - a challenge is that, quite often, national accounts, I-O tables and budget surveys are not compatible, which interferes with the evaluation of socio-economic policies;

• a SAM is sufficiently flexible to incorporate country-specific features and planning priorities, and the guidelines/conventions used in that country's System of National Accounts (SNAs);
• SAMs could be used for analysing income distribution and for sectoral manpower-effects monitoring. The combination of data in an ideal SAM might permit a better analysis of the occurrence of poverty and inequality in living conditions, both as such and as factors inhibiting economic growth. SAMs might also be used to provide base-year data needed for a general equilibrium government policy simulation model. But their use has been largely confined to less-complex, developing economies.

Some Guidelines for the Overall Design of SAMs

A SAM must contain detailed information about the incomes and outlays of institutions (household groups, companies, the government and relevant accounts for the rest of the world), and about the economy's productive structure (e.g., an Input-Output table). The rest of the design depends on the national socio-economic structure, policy needs, and the availability of data and resources.

Some of the `options' to consider in the design of comprehensive SAM are:

• inclusion of subsidiary (nonmonetary/nonmarket) accounts⁴³ with nonmonetary ones; it would likely include an accounting for social values, e.g., cost of crime, environmental degradation, housing situation, health condition, access to education and so on;
• inclusion of detailed factor accounts;
• distinction between production activity and commodity accounts;
• separate accounts for domestic and imported commodities;
• inclusion of want accounts — basic needs (food, shelter ,education, medical services);

• inclusion of flow of funds accounts;
• stocks underlying the flows; quantities and process underlying value transactions;
• Regionalisation: a specification of transactions within and between various geographical areas (the provinces) within one common boundary would amount to the construction of a series of SAMs with their regional interlinkages.

However, considerable resources are also involved in building fully articulated SAMs, and the time needed to construct a SAM expands with the number of accounts incorporated.

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Footnotes

43	A common interpretation of SAMs is that they always include such nonmarket effects. But they are much more than this.