Full text: Study week on the econometric approach to development planning

asset, the actual life will depend on economic circumstances. 
A more realistic approach, therefore, would be to assume that 
assets are scrapped when they cease to earn a return. We 
should like to substitute this assumption for the one we are 
making at present, and our current work on production func- 
tions points to a way in which this might be done. 
The first development I shall mention relates to the distri- 
bution of incomes. At present, households are a single sector 
in SAM, and so have a single income and expenditure account. 
As a consequence, our model can say nothing about the distri- 
bution of incomes by size; it can neither say what changes, 
if any, in the present distribution might be expected in any 
particular circumstances nor can it say what consequences 
would follow if a particular change were to come about. In 
order to study these problems we should have to subdivide 
the income and expenditure account of households into separate 
accounts for different income groups. This could certainly be 
done; it is entirely a question of time and money. The first 
problem would involve dividing the incoming side of the ac- 
count by income group and classifying the incomings by in- 
dustry of origin and type of income; this would be comparati- 
vely difficult to do. The second problem would involve dividing 
the outgoing side of the account by income group and detailing 
the expenditure patterns of the different groups; this would not 
present much difficulty. As a second step, however, it would 
be necessary to work out how the average expenditure pattern 
would change if the distribution of income changed; this could 
be done by an extension of our present demand functions. 
A second development on which, as I have said, we have 
just started to work relates to problems of financing. In terms 
of variables, this means in the first place a large extension of 
our institutional capital accounts, class 14, so as to introduce 
a flow-of-funds statement into the system. For this purpose 
we intend to increase considerably the number of sectors in 
this part of the accounting system so as to distinguish many 
1] Stone - pag. 39

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