Distribution and SAM Multipliers
MODEL LAB · LABORATORY 09
Distribution &
SAM Multipliers.
Close the income–expenditure loop. Trace how production generates factor income, how that income reaches different households, and how household consumption creates further rounds of economic activity.
ProductionFactor incomeHouseholdsConsumption
ENDOGENOUS INSTITUTIONS
Close the loop.
Expand the response.
A SAM multiplier model treats selected production, factor and household accounts as endogenous. Income generated by production returns as household demand, producing induced effects.
Production feedback only
x = (I − A)⁻¹f
Household consumption remains part of exogenous final demand. Effects are direct and indirect.
Institutional feedback included
y = (I − Aₘ)⁻¹g
Factor payments, household income and consumption become endogenous. Induced effects are added.
FROM AGGREGATE INCOME TO INCIDENCE
Who receives?
Who spends?
Factor intensity
Sectoral production determines how much income accrues to labour and capital.
Factor ownership
Household groups receive different shares of labour and capital income.
Consumption propensity
Households differ in how much additional income they consume or save.
Consumption composition
Household groups purchase different commodity bundles, activating different sectors.
DISTRIBUTIONAL MULTIPLIER LAB
Follow income
through households.
Adjust the production shock, labour share, household ownership and consumption propensities. ECONORIA calculates income incidence and induced consumption feedback.
DISTRIBUTIONAL READINGThe shock generates income across all household groups. Closing household consumption adds an induced production round beyond the open IO result.
INTERPRETIVE LIMITS
Distributional detail
requires discipline.
Average relationships
Fixed SAM coefficients do not reproduce individual household behaviour or within-group heterogeneity.
No price adjustment
Income gains may differ in real terms when inflation, rents or wages respond.
Closure determines effects
Endogenising households increases multipliers; this modelling choice must be stated explicitly.
Income is not welfare
Welfare also depends on prices, public services, leisure, risk and environmental conditions.
SCIENTIFIC CHECKPOINT
Why can a SAM multiplier
exceed an IO multiplier?
Which mechanism creates the additional induced effect?
Think about the income–expenditure feedback loop.
