Linear SAM models for inequality changes analysis: an application to the Extremadurian economy

Abstract

Social accounting matrices are adequate databases for the economic modelling. These matrices emphasize the role of households in the economy, and so, they usually disaggregate the household sector into several groups. This disaggregation allows social accounting matrices to be used for diverse income distribution analysis. The objective of this work is to use the linear SAM models to study how inequality is modified by several exogenous injections of income. The set of multipliers and indicators presented is applied to the economy of Extremadura – a region situated in the southwest of Spain. In particular, together with the accounting multipliers, two redistributed income matrices are presented to show how changes in final demand and in income transfers cause opposite effects in inequality. For contrasting these results, Gini and Theil indices are also used. Finally, a major reduction in both would result from an appropriate re-allocation of transfers.