Compilation And Application Of Informal Economy Social Accounting Matrix For China

Since 1970s,informal economy has become widespread in the world,and it has been the largest non-agricultural activities in developing countries.Due to its contribution to goods supply,employment creation,and income generation,informal economy has been highly concerned by authoritative international organizations,such as ILO,IMF,OECD,and World Bank.Theoretical studies show that there exist complex relations between informal and formal economy through forward and backward linkages.Assessment of these linkages will facilitate policy-making for the development of informal economy,and the multifunction of informal economy.However,a quantitative assessment of the linkages requires a unified analytical framework that incorporates both informal and formal economy.Social accounting matrix(SAM)brings different types of transactions and sectors into a unified framework and maintaining a certain independence and integrity.It is a highly effective modern tool for systematic analysis of macroeconomic(Li and Ma,2011).Thus,constructing a social accounting matrix that incorporates informal and formal economy(FI SAM)can provide an effective tool for the assessment of the linkage between informal and formal economy,and a necessary prerequisite for judging the multifunction of informal economy accurately.Since the reform and opening up,the share of informal economic employment in urban China grow from 0.16 percent in 1978 to 58.90 percent in 2004(Hu and Zhao,2006),with rural areas included,the share reaches 83.20 percent(Huang,2013).The ratio of value added created by informal economy to GDP is 0.09 percent in 1978,and 29.98 percent in 2009(Hu and Ma,2012).More importantly,various economic linkages have been established between the Chinese informal and formal economy,and there have been major impact on the macroeconomic performance of informal economy.Although domestic and foreign scholars have carried out multi-angle and multi-level studies on the informal economy,there is a lack of specialized research that incorporates informal and formal economy into a unified analytical framework.In order to grasp the function positioning and macro effect of the informal economy,we do in depth study on China’s FISAM.Based on current research,regarding statistics,economics,sociology,demography theories as a guide,taking SAM and its analysis methods as a master line,and following the logic order of theoretical elaboration,method design,and application practice,the author conducts a systematic research on China’s FISAM,trying to develop a relatively complete research framework for FISAM.The dissertation consists of nine chapters:Chapter 1 presents background and significance,literature review,objective and methodology,research content and technical route,and the innovation.Chapter 2 presents the theoretical foundations of the informal economy.This chapter serves as a theoretical support for the dissertation.First,the development history and related concepts of informal economy is combed to clarify the concepts and categories of Chinese informal economy.Next,the formation mechanism of informal economy is discussed and compared from perspectives of dualism school,structuralism school and Neo liberal school,as well as their applicability in China.Once again,the measurement methods of informal economy,namely,indirect estimation methods and direct investigation methods is introduced and evaluated,after which Chinese informal economy measurement method is elucidated.Last,the macro effects of informal economy are explained from economic growth,employment,and household income perspectives,which provide theoretical preparation for applications of FISAM.Chapter 3 presents the necessity for the construction of FISAM and its framework.This chapter provides the theoretical basis of compilation method for China’s FISAM.On the basis of a brief introduction of concepts,economic relationship contained,compilation methods,and balanced technology of SAM,we demonstrate the necessity of establishing FISAM from perspectives of practical dilemmas,theoretical requirements and international experiences.Next,according to the mechanism between the informal and formal economy,we elaborate the settings of commodity accounts,activity accounts,factor accounts,business accounts,and household accounts from the perspective of the informal economy,thus designing a general FISAM theoretical framework.Finally,in line with SAM’s characteristics,we analyze the advantages and limitations of FISAM designed.Chapter 4 presents compilation methods of China’s FISAM.Based on FISAM theoretical framework and in accordance with China’s actual situation,the macro-FI SAM and micro-FI SAM(refined FISAM)are systematically designed in this chapter,which lay methodological foundations for later studies.First,we design table structures of macro-FISAM and micro-FISAM.Secondly,we show underlying data and whole idea for compilation of FISAM.Thirdly,we design compilation methods for macro-NSAM,which consist of NOE estimation method,input-output tables and flow of funds adjustment methods,macro-NSAM account settings and data acquisition methods.Fourthly,we design macro-FISAM compilation methods involving intermediate use modules,final-use modules,initial input modules and money-flow modules’ compilation methods,and describe the flow decomposition methods in detail.Finally,we design micro-FISAM compilation methods by dividing activities accounts and household accounts.Chapter 5 presents the actual compilation process of China’s FISAM.This chapter is the implementation of Chapter 4.First,we measure the size and proportion of informal economy,as well as the number of informal employee and their wage shares in all sectors,which will provide weight data for compilation of China’s FISAM.Next,via marginal propensity of household consumption and save method,we estimate the NOE proportion to adjust the flow of funds and the input-output tables systematically.Again,through "direct distribution method" and"income transfer method",we determine the values of macro-NSAM accounts,thus constructing the macro-NSAM with ten columns and ten rows.Fourth,with the comprehensive use of "wage share method","output share method" and "fixed asset investment ratio method",the macro-FISAM with thirteen columns and thirteen rows are modularly constructed.Finally,via "top-down approach",we decompose activities accounts and household accounts,and determinate the values of the accounts,thereby constructing the micro-FISAM with forty eight columns and forty eight rows.Overall,this chapter finally establishes five years’ macro-FISAM and micro-FISAM in 1992,1997,2002,2007 and 2012 respectively.Chapter 6,Chapter 7,and Chapter 8 provide the applied research of FISAM established above.The establishment of FISAM is just a start point,the more advantage is economic analysis(Li et al.,2014).In these three Chapters we will do in-depth studies on the most three important effects of informal economy via the five FISAMs established above.Chapter 6 shows the growth effect of informal economy.Based on five input-output modules of the FISAMs,we study the linkages between the informal and formal economy as well as the growth effect of the informal economy by using Leontief inverse matrix and its decomposition technology.This may provide fresh evidence for reinforcing economic relations between the informal and formal economy,and for promoting economic growth.Chapter 7 shows the employment effect of the informal economy.Based on five micro-FI SAMs,we measure the ability to create jobs and their differences of all sector’s informal economy via using employment multiplier,which may provide evidence for developing effective employment policies.Chapter 8 probes the income effect of informal economy.Based on merged micro-FISAM,we study the effect of informal economy on different classes of the urban and rural residents’ income by means of multiplier analysis methods,and the conduction pathways from informal economy to residents’ income by structural path analysis methods,a fresh perspective for research on income distribution gap.Chapter 9 summarizes the dissertation.It consists of conclusions,limitations,and future prospects.