The impact of structural adjustment on income distribution in Pakistan A SAM-based analysis

Abstract

This paper develops a static fixed-price model using the latest social accounting matrix for the year 1989-90. This simple model is used to calculate impact multipliers of socio-economic linkages in a general equilibrium framework. These multipliers provide backward and forward linkages in production, consumption, distribution, and accumulation accounts of the economy. Various simulation exercises are performed using selected fiscal adjustment policies to see their impact on income distribution in Pakistan. The results show that reduction in subsidies has a more adverse impact on the incomes of the richest rural and urban households. Impact of contraction in government current spending appears to be negative on the incomes of all the urban and rural household groups but the largest reduction appears in the income of the richest rural, followed by the poorest urban. But the decline in public expenditure on education and health affects the poorest urban and the poorest rural more than the other relatively better-off urban and rural income groups.