A Multiplier Analysis of Regional Social Accounting Matrix (SAM) Model for Indonesia

Abstract

The aim of this paper is to analyze the Indonesia's inter regional linkages with the regional SAM. For this purpose, we estimated a regional social accounting matrix of Indonesia for the year 1995, which has 75 sectors of account and three divided regions of Indonesia; Sumatra, Java and the rest of Indonesia. The whole system of SAM can be decomposed into four subsystems, three endogenous and one exogenous: production factors, institutions, production activities and everything else. Three endogenous groups of the accounts derive their incomes from initial injections into the economy through multiplier processes. The multiplier matrix of SAM can be decomposed, as is well known, into multiplicative or additive components; an intra group effects, an inter group effects and an extra group effects.At first, we calculate the multipliers and then the traditional multiplier analysis of SAM is carried out by using the regional SAM of Indonesia. Secondly, we examine the input-output linkages between two different regions by way of the third regions with the regional SAM. They can be even used to calculate not only regional repercussions effects but also inter group repercussions effects, if you permute the regional SAM according to division of regions prior to group division of accounts. The inter regional linkages are also decomposed with the group effects of SAM, which makes the transmission mechanism of inter regional linkages much more clear and concrete. This is called the cross effects analysis of the inter regional and inter group repercussion effects.The cross effects analysis is applied for the Indonesia's regional economy using the complex input coefficient, which was worked out by Ihara [5]. We have calculated complex input coefficients between all the three regions of Indonesia and decomposing them into 3 group effects for finding their transmission processes, but the coefficients only by way of Java are found to be economically significant. The results show that Indonesia still has a distinct Java-concentrated characteristic in all aspects of Indonesian economy, and that Java takes a role of transmitting and amplifying, to some extent, the input-output linkages between the other regions of Indonesia.