AN ECONOMETRIC STUDY OF SOME ISSUES IN THE ECONOMIC DEVELOPMENT OF EGYPT: AGRICULTURAL SUPPLY, INDUSTRIAL GROWTH, AND THE BURDEN OF DEFENSE EXPENDITURES. (VOLUMES I AND II)
Since the coup d'etat which brought about the overthrow of the monarchy, Egypt has undergone substantial political and economic transformations. From a mainly agricultural, free market trading with the Western World it turned into a more industrialized managed economy that traded mainly under bilateral agreements with the Eastern Block and was actively engaged in the armed conflicts between the Arab states and the state of Israel. During this period Egypt was unable to solve its fundamental problem of imbalance between its demographic and economic growth. This dissertation studies a few aspects of this basic problem, investigating the stagnation of agriculture, the slow development of industry and the possible economic implications of involvement in the Middle Eastern military confrontation. The study of agriculture focuses on the issue of allocation of land and among crops, particularly between import substituting grains (wheat, maize) and exportable crops (cotton, rice). By using a multiproduct production function approach, a system of single crops production functions is derived. The dynamic form of these functions gives rise to the phenomenon of crop rotation. An empirical formulation of this model is tested, and long run price elasticities of agricultural supplies are computed. The study of the industrial sector focuses on its growth under a critical shortage of foreign exchange and institutional constraints. A growth model is developed in which the production unit follows some managerial rules rather than the classical rules of cost minimization or profits maximization. Under this framework the labor demand is derived from utilization of capital, which is determined by the ratio of intermediate inputs to capital stock. As both intermediate inputs and investments are heavy users of foreign exchange, the effective shortage of the latter and the way it is allocated strongly affects the industrial growth. This model is estimated and used to evaluate the shadow price of foreign exchange and its allocation policies. These two sectors are combined together with other aspects of the economy into a full scale macro-econometric model. This model reflects the dual rural-urban nature of the economy and features several facets of its institutional framework: the industrial labor demand; the full employment policy, where the government is an employer of "last resort"; the rules of foreign exchange allocation; and the pricing mechanism. Econometric modeling for countries like Egypt is a controversial issue. The opposition is based on data problems and the implications of the changing institutional setting. Efforts were made to reduce these problems by trying to improve the data base and to choose appropriate assumptions. These efforts, however, could not free the model completely from these problems. The full scale model is used to assess some aspects of the defense burden. Because of severe data problems with regard to defense expenditures, we avoided an explicit decomposition of the model into a civilian economy and defense sector. Instead, alternative scenarios are defined in political terms and translated into sets of assumptions regarding the components of the model which are relevant to this problem. The effects of reduced domestic military spendings and redirection of funds to investment, and the release of military manpower and partial recovery of foreign exchange used by the military are traced by simulating the model. The analysis includes retrospective simulations and forecasts. The results are shown in terms of deviations from base solution and include calculations measuring to some possible benefits from peace.
Year of publication: |
1980-01-01
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Authors: | SAGI, ELI |
Publisher: |
ScholarlyCommons |
Saved in:
freely available
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