Introduction

All countries keep accounts of national product and income, and many countries keep accounts of flows of funds. Even subnational regions such as states in the USA maintain income and product accounts. But subnational regions do not keep track of the flows of loanable funds within and across their boundaries, even though outflows may drain locally generated income and inflows may be a source of new local investment and, hence, economic growth.

Due to the increasing need for interregional accounts that include financial flows, the US National Science Foundation has sponsored basic research on this topic (Kilkenny and Rose, 1994). Our task is to account for transboundary flows of capital-related income among the fifty states of the US. The point of departure is a set of fifty social accounting matrices (SAMs) that document the generation and distribution of state value added. The state SAMs are to be merged into an interregional SAM of the United States. This requires regionally articulated data on the distribution of current account returns to capital, land and other productive asset accounts.

This simple problem statement conceals the complexity of the actual task. Although it is easy to conceptualise the integration of current and capital account transactions in a SAM, it is difficult to construct regionally articulated data on capital-related income flows and may even be prohibitive without the aid of a SAM.