Foreign Assistance and Development Performance

Abstract

Foreign assistance and development performance for the period from 1960 to 1970 are discussed. Projections of feasible growth and aid requirements for a sample of 50 countries and estimates of the actual values of the Chenery-Strout model are examined. These estimates are considered along the dimensions of GNP growth rates and import and export growth rates. It is noted that failure to achieve planned growth rates is due to such factors as reduction in the expected capital inflow and failure of resource mobilization. By running simulation experiments with an extended version of the Chenery-Strout model, it is calculated that lost exports accounted for a small reduction in growth rate while projected aid deficits influenced growth rate by a substantial margin. The model also demonstrates that with a trade constraint, the optimal policy is to increase the capital inflow even though the effect will be to raise consumption as well as investment.

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