Table Of Content.
CHAPTER 2.
A SOCIAL ACCOUNTING MATRIX FOR ARMENIA∗
1. INTRODUCTION
This report provides documentation related to the 2002 Armenian Social Accounting
Matrix (SAM). Development of this SAM is necessary to identify the potential linkages
between economic growth and poverty alleviation and for basic economic analysis of Ar-
menian tax and trade policies. The credibility of these studies depends upon an accurate
and complete depiction of Armenia’s economy. The 2002 SAM for Armenia is the first
attempt to systematically combine data from disparate Armenian agencies in order to cre-
ate a balanced, representative framework for economic analysis. It is also the first time
that the Armenian survey of household consumption has been integrated together with the
Armenian National Accounts. By providing a bridge between these two fundamental data
sources,theSAMprovidesabasisforcomparisonofdatasourcesandasoundmethodology
tochecktheconsistencyofthenationalandhouseholdaccounts.
The development phase was influenced by the particular uses for the SAM. Some of
theseusesareitemizedhere:
• Economic analysis. A disaggregated picture of the economy is made possible by
combiningthenationaldatawithindustry-leveldata. Thisdisaggregationrevealsthe
inter-relationshipsbetweensectorsastheygrow.
• Economic growth and the incidence of poverty. By connecting poor and rich
households to different factors of production, different consumption bundles, and
differenttransferpatterns,theHouseholdSAMprovidesthebasistodeterminewhat
linkages exist between Armenian economic growth, employment and the alleviation
ofpoverty.
• Multiplier analysis. The inclusion of an Input-Output (IO) matrix into the social
accounts means that we can invert this matrix and generate economic output ”mul-
∗PreparedbyMilesK.Light,UniversityofColorado,andbyEkaterineVashakmadzeandArtsviKhatcha-
tryan,bothWorldBank.
tipliers.” This is often a straightforward way to consider the economic impact of
growthacrossdifferentsectors.1
• Policyandimpactanalysis. ThisSAMprovidesthebasisforastandardizedgeneral-
equilibrium model of the Armenian economy. CGE models are the most common
tool for tax and trade policy analysis. The underlying data describe the industries
and individuals that pay taxes in Armenia and also describe who is consuming im-
portsandwhoisproducingexports.
• Data improvement. A well-documented “benchmark” dataset can be used as a
starting-point for further data development. We hope this SAM will be used as a
benchmarktomeasurethequalityofnewdatasources.
• Data Integration. The official data produced by various Armenian Ministries and
Departments, such as the National Statistical Service (NSS), Ministry of Finance,
CustomsAuthorities,andtheTaxAuthorities,shouldbe“consistency-checked”with
other divisions’ output. Although perfect coordination is not possible, we hope that
this SAM will permit each organization to compare their own data with the outputs
thatwouldbeappliedbycombiningdatafromothersources.
With these needs in mind, we developed three SAMs to represent Armenia’s economy,
each one reveals a different level of detail. The macro SAM represents the most aggre-
gated national accounts. The cells from this matrix replicate the basic national accounting
identities,suchasGDP,NationalIncome,andtheCurrent/CapitalAccounts.
The micro SAM disaggregates total national production into 25 separate industries.
Each industry has a distinct production technology that includes intermediate inputs from
other industries and utilizes different combinations of production factors. This matrix de-
composes aggregate value-added into four distinct factors: skilled labor; unskilled-labor;
capital rents; and land rents. Total direct and indirect taxes are distinguished using the
major Armenian tax streams: value-added taxes; income taxes; profits taxes; excise taxes;
import tariffs; and payroll (social security) taxes. The international accounts are decom-
posed by sector, so that imports, exports, domestic supply, and total aggregate supply is
known for each of the 23 industries. The micro SAM combines all of these components
intoasingle,balancedmatrix.
Finally, the household (HH) SAM projects income and expenditure profiles from a
singlerepresentativeagentontotwentyincomedeciles. Tenruralandtenurbanhouseholds
1Whilethemodelhaslimitationsinmanyaspects,itssimplicityofferscertainadvantages: (i)itsunderly-
ingassumptionsoffixedpricesandfixedtechnologyinaneconomywithampleunderutilizedcapacitylike
Armeniaarereasonableatpresent;(ii)themodelcanbeappliedforunderstandingthenatureofthebackward
and forward linkages in the economy; (iii) the simplicity of the model permits both easy tracking of infor-
mationgapsandeasytransfertotherelevantcounterpartsfortechnicalcapacitybuilding. Atthesametime,
atthisstageinthedatadevelopmentprocess,weadvisecautioususeofInput-Outputanalysis,sincetheIO
tablewecurrentlyuseisanadjustedsurrogatetable.
34
are categorized by income, then each households’ factor income and expenditure patterns,
andtransfersaremappedontothe23industriesandfourfactortypes.
Although we believe that these Social Accounts represent the best available data for
Armenia at this point, there is room for improvement. Closer collaboration with the NSS
couldyieldamoreaccuratedepictionoftotalsectoraloutput. Bythesamemeasure,closer
collaboration with the NSS household survey division might yield more accurate factor
incomes for each income decile. Accurate factor share information is critical in order to
identifytheeffectofindustrialgrowthuponwagesandcapitalrents. Finally,anArmenian-
based input-output table would be an improvement because it would dispel suspicions that
thecorenatureofArmenianproductionisnotcorrectlycaptured.
We hope that the current dataset will lower the cost of further data development and
lead to a universally accepted set of national accounts for the country. This documenta-
tionshouldfacilitatefurtherimprovements,especiallybecauseadetaileddescriptionofthe
buildingprocesshasbeenincludedintheAppendix.
The remainder of this documentation is arranged as follows: section 2. presents three
depictions of the Armenian social accounts; section 3. briefly describes past and future
applications of the Armenian accounts for economic analysis; and section 4. concludes
and offers potential avenues for further improvements. A lengthy and detailed Appendix
documentstheSAMbuildingprocess. Sections4.,4.,and4.detailthealgebraicmechanics
andfilesneededtobuildtheSAMfromscratch.
2. THREE SOCIAL ACCOUNTS MATRICES
In this section we present the Armenian accounts using three separate matrices, each
one has an increasing level of detail. The macro SAM contains only aggregate national
accounts values, the micro SAM adds sectoral detail by disaggregating production, con-
sumption, and trade to 25 goods and industries. Finally, the household SAM adds further
detail by disaggregating the single consumer into 20 separate households using data from
the 2002 Armenian household survey of income and consumption. All of the social ac-
counts are based upon a set of input tables. These input tables are based upon published
governmentstatistics,analyticalreports,andjudgmentsfromlocalexpertsandstaff.
TheAggregatemacroSAM
Wehavechosenaspecificsplitofaccountstorevealsufficientdetailforcalculatingthe
output both from expenditure and the revenue side for constructing the macro SAM. Fur-
thermore, we have made an effort to preserve the mandatory data entries fully comparable
with the System of National Accounts. We have included the following major accounts in
themacroSAM:productivesector,commoditymarkets,factorsofproduction,twoinstitu-
35
Table2.1: AggregateSocialAccountsforArmenia: 2002(MillionsofUSD)
A B C D E F G H
ACT COM VA RA GOV ROW I/S Total
1 ACT 4,337.6 4,337.6
2 COM 1,962.1 2,033 237 698 514.8 5,444.9
3 VA 2,145.5 2,145.5
4 RA 2,145.5 117.7 206.7 2,469.9
5 GOV 230 72 54.7 356.7
6 ROW 1,107.3 1,107.3
7 I/S 364.9 2.0 148 514.9
8 Total 4,337.6 5,444.9 2,145.5 2,469.9 356.7 1,107.4 514.8
Key:
ACT Activitiesaccount,totalproduction.
COM Commoditiesaccount,aggregatedemandandsupplyofgoods.
VA Value-addedaccount.
RA Representative-agentaccount.
GOV Governmentaccount.
ROW Foreignaccount.
I/S InvestmentandSavingsaccount.
Source: Authors’calculations.
tions(i.e. governanceandtherestoftheeconomy),thesavings/investmentaccountandthe
RestoftheWorldaccount.
By using the column totals provided in two of the input tables, Tables 2.12 and 2.13,
we can produce most of an aggregate social accounting matrix. Several national indicator
statisticsfromtheNationalStatisticalService(NSS)canbefoundinthemacroSAMbelow.
For example, GDP at producers prices is equal to total value-added, US$2,145.5 million
USD.The macroSAMisreproducedhereasTable2.1.
These figures should be easy to recognize. Reading by ROW/COLUMN, we see that
total value-added (RA/VA) equals US$2,145 million USD. This figure is identical to the
column sum for VA0 from Table 2.12. Total imports, found in the ROW/COM cell are also
equal to the column total under M0, US$1,107. At some point, however, adjustments were
impossible to avoid. For example total intermediate demand, ID0, is slightly larger in the
macro SAM than it is in input Table #2.12, (US$1,962 versus US$1,924). Other cells can
becheckedinasimilarway.
Table 2.2 compares the macro SAM from Table 2.1 to officially published statistics
from the Armenian National Statistical Service (NSS). There is a clear linkage between
the macro SAM and the Armenian System of National Accounts. The macro SAM cells
36
Table2.2: The Macro SAM Replicates the Following National Accounts measures (com-
parewiththeNSSNationalAccountinghandbookforArmenia)
Value MacroSAM Sheet(cell)
GDP(producerprices) 2,146 A3 SNA(An7)
Netindirecttaxes 230 A5 SNA(An4)
GDPat(marketprices) 2,376 A3+A5 SNA(An3)
Totalabsorption 2,786 D2+E2+G2 SNA(An28)
GNP 2,464 A3+A5+F4+118.7 SNA(An60)
Grossnationaldisposableincome 2,638 A3+A5+F4-F5 SNA(An61)
Grossdomesticsavings 105 A8-A2-D2-E2 SNA(An50)
Grossnationalsavings 367 D7+E7 SNA(An53)
Grossdomesticinvestment 515 G2 SNA(An36)
Directtaxes 73 D5 GFS(AN11)
Totalnetcurrenttransfer 173 F5+118.7 SNA(An49)
Importsofgoodsandservices 1,107 B6 SNA(An26)
Exportsofgoodsandservices 698 F1 SNA(An25)
Currentaccountbalance(?) 148 F7 BOP(AN36)
Note: The Macro SAM cell coordiantes are used to calculate each
macroeconomicstatistic. Thesevaluescanbecomparedwiththecorre-
spondingArmenianSystemofNationalAccounts(SNA).
Source: Authors’calculations.
are presented in column three of Table 2.2, and the corresponding SNA spreadsheet cell is
presentedincolumnfour.
37
Table2.3: StructureoftheDisaggregate(micro)SAMforArmenia,2002
NameofAccount Number Description
Activities/Commodities 25 IndustriesaredescribedinTable2.4.
Factorsofproduction 4 Skilledlabor,Unskilledlabor,CapitalandLand
TaxStreams 6 VAT,excise,labortax,profitstax,payrolltax,andimporttariffs
Government 1 CentralGovernment
Households 1 Onesingle,representativeagent.
TradingPartners 1 ROWtradingpartner
Margins N/A Trade and distribution margins are collected as a production ac-
tivityandusedasanintermediateinput(TRD)
Savings-Investment 3 Private,Government,andForeign
ThemicroSAM
Constructionofacompletesocialaccountingmatrixisdonebydisaggregatingeachcell
contained in the aggregate (macro) SAM. Using more detailed tables for industrial supply
(for example, see Table 2.12), we can produce disaggregated statistics for production, in-
dustrial demand, value-added, final demand, and trade. The dimensions of the micro SAM
forArmeniaarelistedinTable2.3.
Activities/Commodities We used official NSS statistics to compute participation for
major sectors, but some sectors that were provided needed further disaggregation from
outside data sources. For example, the NSS official statistics use “industry” to describe
all manufacturing sectors. We used output shares taken from an IMF Country Report for
Armeniatofurtherdisaggregatethissuper-sectorintosixsubsectors.2
Given total output for each sector, we then use a surrogate Input-Output (IO) table as
a starting point to describe each industry’s production technology. For most sectors, we
assert that the production technology is similar, agricultural industries are typically labor-
intensive in low-income countries, while manufacturing industries are typically capital-
intensive.3
Some sectors are clearly unique to Armenia and required manual adjustment. For ex-
ample, Armenia’s “cut jewelry” sector accounts for one-third of total imports and exports.
This sector uses only one intermediate input, uncut gems. The remainder of the value
2TherelevantpagesfromthisreportareincludedasafigureintheAppendix.
3Interestingly,thelabor/capitalintensityisreversedforhigh-incomecountries. IntheUnitedStates,for
example,agricultureisacapital-intensiveindustryandchemicalmanufacturingislabor-intensive,duetohigh
R&Dcosts.
38
accrues to labor and capital, so the IO matrix was corrected to reflect Armenia’s special
circumstances in the jewelry industry. In other cases, aggregate intermediate demand was
largerthantotalsupply. AdjustmentstotheIOmatrixwererequiredinthesecasesaswell.
AfulldescriptionoftheSAM-balancingprocessisincludedintheAppendix.
Tax Streams Upon request, the Armenian Ministry of Finance has supplied tax col-
lections across tributary streams for each of the 25 commodities. Each of the six taxes is
presented individually in the SAM, but where they appear in the matrix depends whether
theyareclassifiedasdirectorindirecttaxes. Totaltaxcollectionsinourtreatmentareabout
20percentsmallerthantotalgovernmentrevenuesfor2002. Collectionsaresmallerinthis
dataset because we chose to omit some of the revenues from special taxes, fees, and other
miscellaneousincomesthatarenotconsistentyear-to-year.
Government All government activity, local and national, is presented using a single
government agent, and a single government production technology. Government income
comes mostly from tax collections and from transfers. Revenues are spent primarily to
purchase the “government good,” which is produced using intermediate materials, labor,
capital and land. The government also transfers funds to households and contributes to
savings.
Households The micro SAM includes a single, representative agent (RA). The RA
earns income by selling production factors, and the RA consumes goods as final demand.
TotalfactorearningsbytheRAinthismatrixsumstoUS$2,145millionUSD,whichequals
gross domestic product, taken at producer prices. Other income comes from government
transfersandremittancesfromabroad,whichareplacedinthe ROWaccount.
Sector Descriptions Table 2.4 presents 25 industrial sectors with labels and descrip-
tions. ThesesectorsreflectourbestnotionofArmenia’sstrategicandimportantindustries.
Whilesomeofthesectorsinthesocialaccountingmatrixhavebeendisaggregatedfromthe
Armenian national statistics, others are a combination of less-important sectors that were
includedonseparatelinesintheNSSaccounts. Table2.4presentsadetaileddescriptionof
each sector, and a mapping between the NSS output statistics and the sectors in Table 2.4
canbefoundintheAppendix.
Table2.4: Detailed Sector Descriptions for each Industry in the 2002 Armenian micro
SAM
Symbol Description
GRN Grains, potatoes and Legumes. Taken from the Agriculture 2002 dataset
(available in the Armenia SAM distribution). This sector combines {Wheat,
PotatoesandLeguminousPlants}
VFR Vegetablesandfruits,includinggrapes. Includesvegetables,driedfruit(with-
outgrapes)andthegrapesaccount.
VOL VegetableOils. Directlyfrom2002agricultureaccounts.
39
Sectordescriptions: (continued)
Symbol Description
OCR Othercrops. Cropsthatarenotclassifiedelsewhereinthesocialaccounts.
MIL Milkandmilkproducts. Dairyproductsincludingraworprocessedmilk,eggs
andrelatedproducts
OMT Other Meats. Includes the beef, pork, mutton, goat, and poultry categories
fromthe2002agriculturedataset.
ENR Energy. Oil and natural gas - this commodity is not produced in Armenia - it
isapureimport.
MIN MiningandQuarrying. Thissectorcomesfromtwosources. Thefirstsourceis
thenationalaccounts(MacroData.xls)sector“Geology”. Thesecondportion
comesfromtheIMFStatisticalAnnex,page7,Table4: StructureofIndustrial
Production (1996-2001). The portion for “Mining and Quarrying” is taken
fromthe“industry”sectorofthenationalaccounts.
FOD Processed food and beverages. Includes all processed foods, alcoholic and
non-alcoholic beverages. This is one of the largest consumption sectors in
Armenia.
TBC Tobaccoandtobaccoproducts.
CRP Chemicals,rubberandplastic. Thissectorwasapportionedfromtheindustry
macro-sector in the 2002 NSS official output statistics. Oil and natural gas
refiningorprocessingisincludedinthissector.
OMF Othermanufacturing. Manufacturingindustriesnotelsewhereclassified.
LMF Lightmanufacturingandtextiles. Includestextiles,dressing,anddyingoffur.
MNM Mineralsandpreciousstones. Thissectormainlycapturesthejewelry-cutting
business in Armenia. The single largest import and export good in Armenia
is jewels. Un-cut jewels enter the country and finished jewelry is exported.
Shares are taken from Table 4 of the IMF statistical annex. This data-sheet is
availableaspartoftheArmenia SAM distribution,seeAppendixfordetails.
MTL Metalsandmetalproducts. Basicmetalsandfabricatedmetals,takendirectly
fromtheIMFstatisticalannex. Represents8%ofindustrialoutput.
MCH Machinery and equipment. Combines machinery, equipment and motor vehi-
cles with optical, medical and other precision devices. Table 4. Combined
shareis: 3.8%.
UTL Gas,waterandtrashutilities. Thissectorappearstwice. Onceintheindustrial
section from the IMF report, then again as a separate account in the offical
NSS accounts. We combine these two accounts for the total. The totals are:
the“utilitysector”fromthemacroreportand“electricity,gas,andwater”from
theIMFTable4.
ELE Electricityproductionanddistribution. Capturesnuclearelectricityproduction
andthedistributionofpoweracrosstheArmenianelectricitygrid.
CON Construction. TakendirectlyfromtheOfficialNSSnationalaccounts.
TRN Transportation and communications. Includes public transportation activity,
postalcommunication,fixed-lineandwirelesstelecommunications.
40
Sectordescriptions: (continued)
Symbol Description
TRD Trade and distribution activities. Wholesale and retail trade plus commerce
combinestwomacrolines: Retailtradeandcateringplusgeneralcommerce.
BNK Banking and finance. Combines two lines from the 2002 national accounts:
insuranceandlending.
GOV Government, defense, and public procurement. This represents government
activities within the economy. Taken from the Macro data spreadsheet, and
also compared with general statistics regarding the government sector. This
sector also include “social spending,” including four lines from the national
accounts: health&sport,education,culture,andscience.
DWE Dwellingsandhousing. Onelinefromthenationalaccounts: housing.
Armenia2002: ASnapshot
ThemicroSAMdepictstheArmenianeconomyatafairlydisaggregatedlevelandhelps
us to understand the implications of its present structure in terms of sub-sectoral growth.
Table 2.5 displays Armenia’s production and trade statistics for 2002. The largest single
output sectors were construction, trade and processed foods. Other large activities include
the public sector (GOV), cut gems, transporation services, and electricity output. Food is
probably more important to the Armenian economy than it appears in this table. If we
combined the three largest food industries: processed foods (FOD), dairy (MIL), meats
(OMT) and grains (GRN), then consumable food would be the largest single industry in
Armenia. Totalcombinedoutputforthesefourindustriesaccountsfor25.1percentoftotal
production.
Table 2.5 also displays exports (X0), imports (M0) and total domestic supply (A0) for
eachsector. Importandexportvolumeisdominatedbyasinglesector: uncutandcutgems
(MNM). Thissectoralonerepresentsaboutone-quarterofthetotaltradevolumeforArme-
nia. Uncutgemsareimportedintothecountry,theyarethencutandsometimesmountedas
finished jewelry, then re-exported to Europe or the United States. Transportation, services,
andmachineproductsaretheotherlargeexportsforArmenia.
If we re-organize these statistics according to value-added, a different story emerges.
Table2.6containsabreakdownoffactorsandvalueaddedinproductionforeachsector.
The government is the most labor-intensive activity in Armenia, where labor repre-
sents86.1percentoftotalvalueadded. Otherlabor-intensiveindustriesarebanking(BNK),
light manufacturing (LMF), and jewelry cutting (MNM). Column three (VA), displays the
Y
intensity of value-added in production. Machinery, tobacco, and jewelry cutting have the
41
Table2.5: ArmenianProductionStatisticsbySector(2002)
Y0 Y0 (%) D0 X0 M0 A0
Construction 518.3 11.9 512.1 6.2 2.9 515.0
Retail&wholesaletrade&catering 447.2 10.3 447.2 0.0 0.0 447.2
Foodprocessing&beverages 430.7 9.9 379.6 51.1 46.7 426.3
Governance,defense,&publicspend 362.5 8.4 354.8 7.7 7.8 362.6
Diaryproducts,eggs&milk 342.6 7.9 342.1 0.5 6.8 348.9
Mineralproducts&preciousstones 269.3 6.2 11.3 258.0 206.3 217.5
Transport&communication 259.9 6.0 172.2 87.7 24.0 196.2
Electricitysupply&distribution 163.2 3.8 149.8 13.4 5.6 155.5
Beefporkmutton&poultrymeat 159.0 3.7 158.9 0.1 23.1 182.0
Wheatpotatoes&legumes 155.5 3.6 155.2 0.3 50.7 206.0
Electricitygas&watersupply 152.0 3.5 152.0 0.0 0.0 152.0
Vegetables,grapes,driedfruits 132.5 3.1 126.9 5.6 24.0 150.9
Metals&metalproducts 109.9 2.5 65.3 44.7 55.3 120.6
Cropsnotelsewhereclassified 103.1 2.4 98.1 5.0 19.9 118.0
Servicesnotelsewhereclassified 93.7 2.2 23.1 70.6 60.5 83.6
Housing&dwellings 92.6 2.1 92.6 0.0 0.0 92.6
Machinery,vehicles,precisionequip 88.7 2.0 33.0 55.7 186.4 219.5
Tobaccoproducts 80.9 1.9 77.3 3.6 30.0 107.3
Energy-oil&naturalgas 75.7 1.7 75.7 0.0 156.5 232.2
Mining&Quarrying 65.9 1.5 27.2 38.7 1.1 28.4
Othermanufacturing 61.2 1.4 56.1 5.0 52.1 108.3
Chemicalsrubbers&plastics 53.0 1.2 44.7 8.3 81.7 126.4
Lightmanufacturing&textiles 52.6 1.2 23.5 29.1 40.1 63.7
Bankinglending&insurance 51.6 1.2 44.9 6.7 11.3 56.2
Vegetableoils&fats 15.8 0.4 15.8 0.0 14.3 30.1
Key:
Y0: Aggregateproductionvalue.
Y0(%): Productionshareoftotaloutput.
D0: Supplytodomesticmarket.
X0: Supplytoexportmarkets.
M0: Importvalue(cif).
A0: Armingtonsupply(D0+M0).
Source: Authors’calculationsandNSSstatistics.
42
Description:CHAPTER 2. A SOCIAL ACCOUNTING MATRIX FOR ARMENIA⁄ 1. INTRODUCTION This report provides documentation related to the 2002 Armenian Social Accounting
