Abstract
This paper examines the sensitivity of quantitative assessments of foreign aid on the level of income and its distribution across income groups to alternative modelling and parametric assumptions. It does so with the use of a computable general equilibrium model for Egypt by subjecting the model to alternative assumptions. Although the results are (as expected) sensitive to the assumptions made, they indicate that at least potentially, as for example, when foreign aid takes an appropriate form and is accompanied by appropriate offsetting policies, it can be a useful tool for achieving development at minimum social cost.
The purpose of this paper is to examine the sensitivity of quantitative assessments of the effects of foreign aid on the level of income and its distribution across income groups to different modelling and parametric assumptions. It does so within an analytical framework that is considerably more general and flexible than that which has typically been used for such purposes. The sensitivity of the results is determined by subjecting a computable general equilibrium (CGE) model of an important foreign aid-receiving country, namely, Egypt, to a series of different simulation experiments.
The presentation is organized as follows: Section 1 reviews the considerable change in attitude to the efficacy of foreign aid in promoting economic development and an equitable distribution of its benefits; Section 2 briefly describes the CGE model which has been employed and its flexibility features; Section 3 outlines the simulation experiments and presents the results; finally, the conclusions are presented in Section 4.
The author expresses his appreciation for the programming assistance of Charles Williams who is the co-author and co-designer of the CGE modelling package used in this paper and to the editors for their useful comments and suggestions. Gerhard Tintner’s pioneering work in modelling some of the issues discussed here, much of which was done at the University of Southern California, was also an inspiration to this work.
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© 1988 Martinus Nijhoff Publishers, Dordrecht
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Nugent, J.B. (1988). Foreign Aid, Economic Development and Income Distribution: Some Inferences from a CGE Model for Egypt. In: Sengupta, J.K., Kadekodi, G.K. (eds) Econometrics of Planning and Efficiency. Advanced Studies in Theoretical and Applied Econometrics, vol 11. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-3677-5_4
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DOI: https://doi.org/10.1007/978-94-009-3677-5_4
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