poverty and achieving the Millennium Development Goals (MDGs). Compared to other CGE models, MAMS is distinguished by its coverage of human development, including MDGs, education and its link to the labor force and its educational make-up, as well as the interaction of human development with other aspects of economic policy and performance. In MAMS, government spending is disaggregated by function, singling out spending on education (disaggregated by level), health, and infrastructure, and other areas. Government financing is disaggregated into different types of taxes, domestic and foreign borrowing, and foreign grant aid. MAMS generates a wide range of measure of economic performance including the evolution of

- poverty and selected other MDG indicators, in this application also including undernourishment;

- macro indicators: private and government consumption and investment, exports, imports, GDP and absorption;<sup>3</sup> the government budget, the balance of payments; the savings-investment balance; total factor productivity; and domestic and foreign debt stocks;

- the sectoral structure of production, employment, incomes, and trade;

- the labor market: unemployment; and the educational composition of the labor force.

This section provides a non-technical summary of MAMS, split into two modules – core, and MDG and education – and its LIC database, developed for this application.<sup>4</sup>

# _Core module_

Figure 2.1 summarizes the payment flows that are captured by MAMS for the model country, here referred to as the LIC, in any single simulation year. In any application, including the current one, most of the payments flows and boxes shown in Figure 2.1 are further disaggregated; we present the current disaggregation later in this section. <u>Activities produce,</u> selling their output at home or abroad, and use their revenues to cover their costs (of intermediate inputs, factors, and taxes). Their decisions to pursue particular activities and employ factors are driven by profit maximization. The shares exported and sold domestically depend on the relative prices of their outputs in world and domestic markets.

MAMS includes three core institutions: households, government, and the rest of the world. <u>Households</u> earn incomes from factors, transfers and interest from the government (with the interest due to loans from the households to the government), and transfers from the rest of the world, net of interest on household foreign debt.<sup>5</sup> These are used for direct taxes, savings, and consumption. The savings share depends on per-capita incomes. Their consumption decisions change in response to income and price changes. By construction (and as required by

> 3 Absorption is defined as total domestic final demand, i.e. the sum of household and government consumption and investment. Starting from the 1993 revision of the System of National Accounts (SNA), absorption is referred to as “gross national expenditure” although the latter term does not yet seem to be widely used.

> 4 For a detailed presentation of MAMS, see Lofgren et al. (2012).

> 5 The household may lend to the government and borrow from the rest of the world; given this, it may receive interest payments from the government and make interest payments to the rest of the world.

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