1. Abstract
This thesis employs multi-sectoral modelling techniques to analyse the potential im-
pact of Fiscal Devolution for Scotland. A Social Accounting Matrix (SAM) is con-
structed, which captures the flows of funds in Scotland for 2009.
The SAM is then disaggregated to identify the three government sectors operating
in Scotland, namely the UK Government, the Scottish Government and the Local Gov-
ernment. Also, the tax account is disaggregated to identify three tax accounts, each
corresponding to one of the three government sectors. Moreover, the unified house-
hold sector in the SAM is disaggregated to identify seven household sectors by type.
The disaggregated government and household accounts are then combined into one
SAM.
Next, the Type II Input-Output multiplier model and the SAM multiplier model are
tested and analysed. Three variants of the Type II output multiplier are tested against
the SAM multiplier as a baseline. The results here establish that the SAM multiplier
captures the flows of funds in the Scottish economy in the most accurate and compre-
hensive way.
The standard SAM model is then extended to endogenise part of the Government
sector in Scotland, namely the Scottish Government and the Local Government. This
enables the model to capture the effects of an exogenous demand shock under differ-
ent degrees of fiscal devolution for Scotland. The results indicate that a more fiscally
autonomous Scotland is subject to higher sensitivities to shocks.
Finally, this thesis employs a Computable General Equilibrium model (AMOS) for
Scotland. The model is extended to capture the three Government accounts in the
SAM. The model is used to simulate a balanced budget fiscal expansion, where the
increase in tax revenue funds a rise in government consumption. The results suggest
that a positive valuation of the increase in public amenity provision and a full reflection
of that in the wage bargaining process are crucial for a net growth outcome.
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