|**Tool name:**|**Poverty Analysis Macroeconomic Simulator**|
|---|---|
|**What is it?**|PAMS is an econometric model that links a macro-consistency model or macroeconomic framework to<br>a labor-poverty module.|
|**What can it be used for?**|PAMS can be used to address the impact of macroeconomic policies and exogenous shocks (such as an<br>exogenous rise or fall in output growth or a change in the sectoral composition of output) on individual<br>households.|
|**What does it tell you?**|PAMS can produce historical or counterfactual simulations of (1) alternative growth scenarios with<br>different assumptions for inflation and fiscal and current account balances; these simulations allow<br>tradeoffs within a macro-stabilization program to be tested; (2) different combinations of sectoral<br>growth (agricultural or industrial, tradable or nontradable goods sectors) within a given aggregate GDP<br>growth rate; and (3) tax and budgetary transfer policies.|
|**Complementary tools:**|Stakeholder analysis can be useful for identifying groups to inform the process of selecting<br>microcategories.|
|**Key elements:**|PAMS has three main components. First is a standard aggregate macro-framework that can be taken<br>from any macro-consistency model (for example, RMSM-X, 123) to project GDP, national accounts,<br>the national budget, the balance of payments, price levels, etc., in aggregate consistent accounts.<br>Second is a labor-market model that breaks down labor categories by skill level and economic sectors<br>in which the production total is consistent with that of the macro-framework. Individuals from the<br>household surveys are joined in representative groups of households defined by the labor categories of<br>the heads of household. For each labor category, labor demand depends on sectoral output and real<br>wages. Wage-income levels by economic sector and labor category can thus be determined. In<br>addition, different income tax rates and different levels of budgetary transfers across labor categories<br>can be added to wage income. Third is a model that uses the labor-model results for each labor<br>category to simulate the income growth for each individual inside a group, which is assumed to be a<br>representative group. After projecting individual incomes, PAMS calculates the incidence of poverty<br>and the inter-group inequality.|
|**Data/information:**|The model requires national accounts with a breakdown by sector, household survey data with income<br>or expenditure data by unit, and a wage and employment breakdown by sector.|
|**Time:**<br>**ements**|With a macro-model, the time needed to build a PAMS would be about three months: (1) one month to<br>select or extract categories of households from the household survey and match the economic sectors<br>from the macro-model, (2) one month to link the macro-model to the household survey data, and<br>(3) one month to run the macro- and household-module together and adjust.|
|**Skills:**<br>**Requir**|Knowledge is required of (1) national-accounts-based macroeconomic models, (2) basic labor-demand<br>models, and (3) the structure of household surveys.|
|**Supporting**<br>**software:**<br>|EViews, Excel.|
|**Financial cost:**|US$25,000 when the data are available. This does not include the cost of developing a macro-model or<br>a new household survey.|
|**Limitations:**|The main limitation is the lack of feedback of the micro-model into the macro-model.|
|**References and**<br>**applications:**|�<br>For an overview, see Pereira da Silva, Essama-Nssah, and Samaké (2003).<br>�<br>Pereira da Silva,Essama-Nssah,and Samaké(2002).|

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