Input-output analysis is often extended in two ways. First, by including
data on factor payments, sources of household income, and the pattern of
household goods consumption across various social groups (such as urban
and rural households), a social accounting matrix (SAM) is created. This is accomplished
by adding data from the system of national accounts, balance of
payments, and flow-of-funds databases, often supplemented with household
survey data, to the basic input-output table. A SAM therefore provides a comprehensive
and detailed quantitative description of the interrelationships in
an economy as they exist at a point in time, making it well suited as a tool for
evaluating the impact of alternative development policies. SAMs for many
countries can be found online. SAMs are often further elaborated with computable
general equilibrium (CGE) models, which assume that households
maximize utility and firms maximize profits. Utility (or demand) and production
functions are assumed or estimated from national data. The resulting impact of the policy is then simulated using standard computer programs. The CGE
approach is more complicated than a SAM, but its value lies in enabling policymakers
to take into account the possible reactions of consumers and firms to
the alternative policies being considered rather than assume that they will behave
the way they did before the new policies were implemented