# **3. Development of MAMS**

The impact of government investments and the efficiency of their management are assessed by means of MAMS. The Maquette for MDG simulations (MAMS), developed by researchers at the World Bank, is a computable general equilibrium (CGE) model that simulates the impact of development strategies on the economic and social development of a country in the medium and long run (i.e. with simulation periods that typically are five years or longer). MAMS has been applied to some 45 countries, typically addressing policy issues related to public spending (in terms of total resource envelope, sector priorities, and sequencing), financing (including taxation and foreign aid), and efficiency of public service production and delivery. Like other CGE models, it captures the circular flow of income, linking output markets, production, factor markets, households, the government, and the balance of payments (reflecting the rest of the world). For each link in the chain, a budget constraint is operative, i.e., total receipts, including borrowing (if any), must equal total spending, including savings (if any). The structure of MAMS is derived from basic economics: producers maximize profits; the demand functions of consumers are derived from utility maximization; and prices (or wages) clear domestic markets. The distinguishing characteristic of MAMS is an embedded module that links disaggregated government services and other relevant variables to selected education and MDG indicators.<sup>3</sup> In spite of a common general structure, MAMS does not presume that one size fits all: the simulations and the underlying assumptions are tailor-made for each case study; the structure and disaggregation of the database reflect country characteristics and the purpose of the case study. For the MAMS application to the Republic of Congo, private and government production are each disaggregated into six sectors, for the government corresponding to different functions – three types of education (primary, secondary and tertiary), health, infrastructure, and other government services.<sup>4</sup> The development of the MAMS for Congo required extensive data collection. The key component of the database is a social accounting matrix (SAM), complemented by elasticities (related to production, consumption, trade and MDG functions) stock data (covering factors, population, and school enrollment), productivity impacts of changes in infrastructure capital stocks, as well as various education and MDG indicators.<sup>5</sup> The model has been carefully calibrated to ensure the robustness of the results.

# **4. The impact of more efficient investment on growth and employment**

MAMS is here used to assess the impact of increased efficiency on growth and employment. A baseline scenario serves as benchmark to measure the effect of higher productivity and efficiency of investment as well as the timing of the investment program. The baseline scenario assumes that past trends will continue, but also takes recent information into account, especially on government finances.

Different scenarios have been developed assessing the impact of productivity gains, the timing of scaledup investment and improved government efficiency in managing public investments. The scenarios are defined as follows; a detailed description is given in the following sections:

> 3 Appendix 2 provides a non-technical description of MAMS. For more technical descriptions, see Bourguignon et al. (2008), Lofgren et al. (2011), and Lofgren (2010).

> 4 See Table A2.1 for a full account of the disaggregation of the Congo database.

> 5 The necessary information has been obtained, among others, from the IMF, the PRSP, the World Development Indicators, from World Bank (2010a), Guetsop Nangue (2009), budget information and UN Population Forecasts.

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