**3. The origin and the use of institutions' aggregate income**

From the reading of the macro SAM presented in Subsection 2.1, it is possible to see that the study of the institutions' income, in general, and of the effects of a social policy measure of the increase in households' income, in particular, involves the current or aggregate institutions' income, which supposes the disaggregation of the institutions' current account. On the other hand, as illustrated in **Table 1**, because the main source of that income is GNI, that is to say, the compensation of factors of production received by residents, or the income generated by them in the (domestic) economy and abroad, the factors of production account should also have some disaggregation.

According to the SNA nomenclatures and the available information provided by the national accounts, the disaggregation of the factors of production account are going to be made in 'labour' and 'others' (factors of production), with the former (labour) including the compensation of employees, and the later (others) including the compensation of employers and ownaccount (or self-employed) workers, and also the compensation of capital, namely property income. In turn, although five institutional sectors can be identified in the institutions' current account, considering that the abovementioned purpose of this study, this disaggregation is going to be in: 'households'—"all physical person in the economy"; '(general) government' with the political responsibility of redistributing income, and 'others'—the non-financial and financial corporations and non-profit institutions serving households.

Following the previous application, **Tables 2** and **3** represent the result of this disaggregation regarding, respectively, the origin (rows) and use (columns) of the aggregate income can be found in the totals of these tables – the amounts between brackets in the cells of the row and the column with the thicker border in **Table 1** (the institutions' current account).

Even when continuing at a high level of aggregation, much information regarding institutions' aggregate income can be taken from the following two tables. Our focus will be directed mainly on the households. Government, as an intervenient in the households' income through (re)distribution policies, also deserves special attention. Households hold 60.8% of the total aggregate income, the Government holds 24.6%, and the other institutions (non-financial and financial corporations and non-profit institutions serving households) hold the remaining 14.6%.

As shown in **Table 2**, households' income source is mainly compensation of factors of production (73.8%), in which labour represents the main part (47.7%). The other source of households' income is current transfers from domestic institutions (23.3%) and from the rest of the world (2.9%). Within these transfers, the largest share comes from the Government (19.1%).


In turn, the main source of the Government's income is current transfers from domestic institutions (62.8%) in general and from households (53.4%) in particular. Taxes on production and imports, net of subsidies also have a significant share of 37.3%, which helps to compensate the negative share of compensation of factors of production due to the high amount of

Thus, households are the only institutional sector that receives compensation of labour, which represents 29% of the total aggregate income. In the latter case, current transfers from households represent 15.8%, and from the Government, 12.4%. These three items represent more than half of the aggregate income of Portugal in 2015, meaning that changes in them will

From **Table 3**, it can be seen that final consumption is the main (69.1%) destination of households' income, followed by current transfers to the Government (21.7%), in which taxes on

interests to pay.

Source: Statistics Portugal (*INE*).

**Table 3.** The use of aggregate income of institutions in Portugal in 2015.

**Outflows (expenditures)**

Final consumption

Current transfers to the ..

Gross savings

**Current account of institutions**

**% Millions of Euros**

**Millions of Euros**

Current transfers to domestic institutions

**Households Government Others Total**

.. of products 114,058 69.1 32,584 48.7 3669 9.2 150,311 55.3

Households 2098 1.3 31,507 47.1 4842 12.2 38,446 14.2 Government 35,736 21.7 22 0.0 6225 15.7 41,983 15.5 Others (institutions) 5078 3.1 2169 3.2 2350 5.9 9597 3.5 (sub)total 42,912 26.0 33,698 50.4 13,417 33.8 90,027 33.1

Rest of the world 1219 0.7 2241 3.4 956 2.4 4415 1.6

Households 6826 4.1 0 0.0 0 0.0 6826 2.5 Government 0 0.0 −1652 −2.5 0 0.0 −1652 −0.6 Others (institutions) 0 0.0 0 0.0 21,683 54.6 21,683 8.0 (sub)total 6826 4.1 −1652 −2.5 21,683 54.6 26,858 9.9

Total (expended) 165,014 100.0 66,871 100.0 39,724 100.0 271,610 100.0

**% Millions of Euros**

Using a Social Accounting Matrix for Analysing Institutions' Income: A Case from Portugal

**% Millions of Euros**

http://dx.doi.org/10.5772/intechopen.78602

**%**

9

certainly have non-negligible effects.

**Table 2.** The origin of aggregate income of institutions in Portugal in 2015.


**Table 3.** The use of aggregate income of institutions in Portugal in 2015.

Following the previous application, **Tables 2** and **3** represent the result of this disaggregation regarding, respectively, the origin (rows) and use (columns) of the aggregate income can be found in the totals of these tables – the amounts between brackets in the cells of the row and

Even when continuing at a high level of aggregation, much information regarding institutions' aggregate income can be taken from the following two tables. Our focus will be directed mainly on the households. Government, as an intervenient in the households' income through (re)distribution policies, also deserves special attention. Households hold 60.8% of the total aggregate income, the Government holds 24.6%, and the other institutions (non-financial and financial corporations and non-profit institutions serving households) hold the remaining 14.6%.

As shown in **Table 2**, households' income source is mainly compensation of factors of production (73.8%), in which labour represents the main part (47.7%). The other source of households' income is current transfers from domestic institutions (23.3%) and from the rest of the world (2.9%). Within these transfers, the largest share comes from the Government (19.1%).

**Households Government Others Total**

Labour 78,724 47.7 0 0.0 0 0.0 78,724 29.0 Others (factors..) 42,984 26.0 −1330 −2.0 29,545 74.4 71,199 26.2 (sub)Total 121,708 73.8 −1330 −2.0 29,545 74.4 149,923 55.2

Households 2098 1.3 35,736 53.4 5078 12.8 42,912 15.8 Government 31,507 19.1 22 0.0 2169 5.5 33,698 12.4 Others (institutions) 4842 2.9 6225 9.3 2350 5.9 13,417 4.9 (sub)total 38,446 23.3 41,983 62.8 9597 24.2 90,027 33.1

Rest of the world 4860 2.9 1,273 1.9 582 1.5 6716 2.5

Total (received) 165,014 100.0 66,871 100.0 39,724 100.0 27, 610 100.0

**% Millions of Euros**

0 0.0 24,945 37.3 0 0.0 24,945 9.2

**% Millions of Euros**

**%**

the column with the thicker border in **Table 1** (the institutions' current account).

**Current account of institutions**

**% Millions of Euros**

**Millions of Euros**

Compensation of factors of production (gross national income)

**Inflows (incomes,..)**

from industries and

Current transfers from…

Source: Statistics Portugal (*INE*).

**Table 2.** The origin of aggregate income of institutions in Portugal in 2015.

products

Net taxes on production and imports

8 Sustainability Assessment and Reporting

Current transfers from domestic institutions

In turn, the main source of the Government's income is current transfers from domestic institutions (62.8%) in general and from households (53.4%) in particular. Taxes on production and imports, net of subsidies also have a significant share of 37.3%, which helps to compensate the negative share of compensation of factors of production due to the high amount of interests to pay.

Thus, households are the only institutional sector that receives compensation of labour, which represents 29% of the total aggregate income. In the latter case, current transfers from households represent 15.8%, and from the Government, 12.4%. These three items represent more than half of the aggregate income of Portugal in 2015, meaning that changes in them will certainly have non-negligible effects.

From **Table 3**, it can be seen that final consumption is the main (69.1%) destination of households' income, followed by current transfers to the Government (21.7%), in which taxes on income are included. In turn, the Government uses almost equal shares of its aggregate income in final consumption (48.7%) and current transfers to households (47.1%), in which social benefits are included. Both for households and for Government, all the other items identified as destinations of income have a residual or non-existent meaning.
