ECONOMY-WIDE PUBLIC FINANCE AND INCOME DISTRIBUTION IN A LINEAR FRAMEWORK (ECONOMIC DEVELOPMENT, PLANNING, GENERAL EQUILIBRIUM MODELS)

The responsible management of public financial assets requires a detailed understanding of both the level and composition of income effects resulting from public expenditure policy. This study seeks to integrate an aggregate budget consistency framework with a disaggregated social accounting apparatus to assess fiscal management and other public financial issues in an explicitly distributional context. The basic analytical vehicle is an economywide model of absolute and relative income determination. Incomes can be disaggregated to an extent chosen by the policy maker, and the model then allows detailed analysis of the absolute and compositional income changes for the chosen institutions as these changes result from public financial decisions. Extensive use is made of multiplier and matrix decomposition methods to trace the impacts of public financial policy through the economy and to examine the structural relations between institutions. A chapter is also devoted to the derivation and implementation of accounting prices for public financial decisions, such as social cost-benefit and project analysis. All the analytical results are illustrated with a linear example of the general determination model. This example, which corresponds to extended Leontief or Social Accounting Matrix models, would provide a natural prototype for implementing the methods developed here in any real economic policy setting.