Multiplier Decomposition, Inequality and Poverty in a SAM Framework

The aim of this paper is to show how and why it is possible to assess both direct and indirect effects of exogenous income injections on mean income of different household groups using a new approach based on the decomposition of SAM-based multipliers. The approach we propose allows analyzing the level of inequality in the distribution of income linking the formation of household income to the features of country’s productive structure. After deriving the “accounting price multipliers matrix”, we introduce a new technique (Pyatt, Round, 2006) in order to decompose each element of the total multiplier matrix which enlighten in “microscopic detail” the linkages between each household group’s income and other accounts whose income has been exogenously injected. The meaning and the relevance of the multiplier decomposition method will be illustrated with an application to the Italian economic system.