Chapter 7 How Does Growth Affect Labor Income by Gender ? A Structural Path Analysis for Tanzania

Social accounting matrices (SAMs) have been used fairly extensively to model the effects of shocks on a nation's economy. A brief literature review on SAMs and examples of their use for simple simulations were provided by Parra and Wodon (2009b) in chapter 6 of this volume. That chapter highlighted the strengths and weaknesses of SAMs and emphasized the need to be care­ ful before using SAM-based simulation results in order to inform policy. It is worthwhile to start here by summarizing briefly some of the key features of SAMs from that chapter. A social accounting matrix is a database with information on cross-purchases between different agents and sectors in the economy. But it can also be used as a simple, static yet comprehensive model of an economy. As such model, the SAM assumes that all agents and accounts behave according to their expenditure propensities, which represent what one agent or account in the economy buys from other agents or accounts. It is also assumed that these propensities are unaffected by the shocks simulated in the model; that is, there are no behavioral responses or changes following a shock. This means, among other things, that when a SAM is used for quantity shocks, prices are held constant, and when it is used for simulating price shocks, quantities used or consumed are also held constant.