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Abstract
Addressing longer-term issues of economic development in Egypt, the paper employs
a dynamically recursive computable general equilibrium (CGE) model to assess the
outcomes associated with two types of development approaches over the period 1998-2012.
One is a targeted sector development approach, and the second is a more broad-based
development approach. Under the first development approach technological advancement is
separately targeted to three sectors: agriculture, food processing, and textiles. Each sectoral
choice is intended to represent alternative development strategies which we label (i)
agricultural-demand- led industrialization (ADLI); (ii) food-processing-based (FOOD); and
(iii) textile-based industrialization (TEXTILE). Under the second approach a more broad based
development strategy is adopted where the same technological advancement is
equally distributed among the three sectors and takes place simultaneously. We refer to it as
(BAL) – a sectorally balanced industrialization strategy. Results focusing on the pattern of
growth and measures of income inequality – the Theil and Atkinson measures – from the
four strategies are compared to a benchmark growth path, which we label (BASE). The
analysis was carried out under two cases; one where the ease of transforming output
between domestic markets and export markets is low for all production sectors including
agriculture, and another where we assume perfect transformability for agriculture. In the
first case, the TEXTILE strategy is pro-growth and more egalitarian, while ADLI generates
a combination of more rapid growth and increasing inequality. For the second case, ADLI
strategy dominates in terms of rapid growth and reduced inequality. The results indicate
that, when agricultural exports remain relatively low, promoting the Egyptian textile sector
is a win-win scenario in terms of rapid growth and equity. In addition, adopting policies that
maintain agricultural prices leads to rapid growth and a general improvement of the
distribution of income among households. A crucial policy objectives for achieving rapid
and egalitarian growth for the Egyptian economy is the ability to secure improved access to
international textile markets and the successful expansion of agricultural exports.