ABSTRACT
This chapter demonstrates how the impacts of changes in transfer payments can be estimated using input-output models. It discusses some of the problems encountered in estimating the impact of changes in transfer payments and describes the regions and the models used in the study followed by a discussion of the results. Household income in a regional input/output model is divided into two components: endogenous income and exogenous income. One of the most obvious characteristics of income transfers is their distribution across households. Two factors determine the size of the impacts: the level of transfers and the strength of linkages. Two major conclusions can be drawn from the results. First, it is important to use a model with a disaggregated household sector when modelling the impacts of changes in transfer income. The second conclusion is that some mechanism needs to be developed that will endogenize the portions of transfer income which are tied to regional activity.
