Andreas G. Papandreou - A Strategy For Greek Economic Development

CENTER OF ECONOMIC RESEARCH
RESEARCH
MONOGRAPH
SERIES
A STRATEGY
FOR GREEK
ECONOMIC
DEVELOPMENT
By
ANDREAS G.PAPANDREOU
ATHENS- GREECE
A STRATEGY FOR GREEK ECONOMIC
DEVELOPMENT
C E N T E R OF ECONOMIC R E S E A R C H
Research Monograph Series
1
A STRATEGY FOR GREEK ECONOMIC
DEVELOPMENT
By
ANDREAS G. PAPANDREOU
Professor of Economics, University of California
and
Director, Center of Economic Research
ATHENS, GREECE
Copyright 1962 by the Center of Economic Research.
CONTOS PRESS Co.

Athens, Greece
A C K N O W L E D G E M E N T S
I should like to thank the Center team which worked on

the project. Much of the responsibility for the quantita-
tive work of the project was borne by Mr. John Venieris.
He was assisted by Andreas Kintis and Kimon Constas.
Mrs. Katherine Kallergi, assisted by George Psacha-
ropoulos and George Mattheos, carried out the work
relating to the twelve alternative programs and to one of
the three feasibility tests. George Pholopoulos and Paul
Yannas have also assisted in several phases of the work.
Messrs. D. Chalikias, E. Devletoglou, N. Marmata-
kis, P. Stratoudakis and R. Westebbe participated in
many discussions during the formative period of the
project, and prepared studies on institutional aspects of
the Greek Economy which, while not included as such
in the final report, were very useful as a check on our
quantitative results.
Professors Adam Pepelasis and Benjamin Ward and
Mr. A. Kominos followed the progress of the project very
closely, and have offered many valuable suggestions.
I must also acknowledge the contribution of many vi-
sitors at the Center of Economic Research. Professors
E. S. Mason, Paul N. Rosenstein - Rodan, H. B. Che-
nery, R. Eckaus, Roy Radner and Gardner Ackley have
discussed with me various aspects of the project.
To all I express my gratitude. Needless to say, the
responsibility for the final product is entirely my own.
ANDREAS G. PAPANDREOU
THE CENTER OF ECONOMIC RESEARCH
The Center of Economic Research in Greece was estab-

lished in 1961 in the expectation that it would fulfill three
functions: (1) Basic research on the structure and be-
havior of the Greek economy, (2) scientific programming
of resource allocation for economic development, and (3)
technical-econo mie training of personnel for key posi-
tions in government and industry. Its financial resources
have been contributed by the Ford and Rockefeller Found-
ations, the Greek Government and the United States
Mission in Greece. The University of California at
Berkeley participates in the process of selection of schol-
ars who join the Center's staff on an annual basis. It
also participates in a fellowship program which sup-
ports research in Greece by American graduate students,
as well as studies by Greek student1} for advanced work
in economics in American Universities.
Fellowships are also provided to young men who have
graduated from a Greek University. They join the Cen-
ter as junior research fellows for a three-year period.
They assist the senior fellows in their research and par-
ticipate in seminars given by them.
The Center's main task, naturally, is the carrying on
of research on key aspects of the Greek economy and on
the fundamental policy problems facing the country in
its effort to develop rapidly in the framework of the Eu-
ropean Common Market. This research is carried on by
teams under the direction of senior fellows. The results
5
are published in a Research Monograph Series.
The lectures and seminars included in the Center's
program are not for the benefit only of those working for
the Center. Economists, scholars and students of econo
mics are also invited to attend and participate in this cul
tural exchange which, it is hoped, will be carried out in
co-operation with institutions of higher learning here and
abroad. A Lecture Series and a Training Seminar Series
round off the publications program of the Center.
Another need which the Center has set out to meet is
the establishment of a library and a bibliographical ser
vice in the economic sciences. Besides its usefulness for
the education of the trainees of the Center, this service
will be of particular interest to Greek economists in general.
It is contemplated that the Center will exchange inform
ation and results with similar Centers in other countries
and will participate in joint research efforts with Greek
or foreign public and private organizations.
Finally, one should emphasize that this is one more
example of Greek-American co-operation, a pooling of
human talent, funds and efforts, designed to promote the
training of economists and help in meeting Greece's needs
in the field of economic development.
The ultimate aim is eminently practical: to help in
creating a better life for the Greek people.
Π
C O N T E N T S
PREFACE 13
C H A P T E R 1
SALIENT FEATURES OF GREEK ECONOMIC GROWTH
IN THE NINETEEN - FIFTIES
I . Introductory 17
II. Monetary Stability and the Balance of Payments 20
III. Structural Aspects 23
C H A P T E R 2
PLANNING RESOURCE ALLOCATION FOR ECONOMIC
DEVELOPMENT
I. Economic Development: A Decision Problem for the
Public Policy Authority 29
II. Planning Resource Allocation as an Optimization
Problem 32
III. Growth, Income Distribution and Employment 37
IV. Sub-optimization in a Mixed Economy 42
C H A P T E R 3
GROWTH ALTERNATIVES FOR THE GREEK ECONOMY
1963 - 1972
I. Introductory 55
II. Some Structural Comparisons 60
III. Some Alternative Investment Programs 65
IV. Feasibility of the Programs : Financing Requirements 77
V. Feasibility of the Programs : The Balance of Pay-
ments 88
VI. Feasibility of the Programs : Labor Requirements and
Labor Supply 93
VII. Conclusions 101
A P P E N D I X
Mathematical Appendix 109
Tables Ill
7
TABLES IN THE TEXT
1. 1. Active Population Estimates for 1961 Page 26

2. Number of Persons Permanently Emigrating
from Greece, 1955 - 1961 » 26
3 . 1. Some Structural Comparisons: Composi-
tion of Gross Domestic Product at factor
cost, 1952, 1960, 1972 » 62-63
2. Incremental Capital - Output Ratios Em-
ployed in Projections » 65
3 . 3 . 1 . Alternative Structural Targets for Twelve
Programs » 66
3.2. Annual Rate of Increase of G.D.P. at factor
cost, 1963 - 1972, and of Gross Fixed Capi-
tal Formation, 1963 - 1970, by Sectors. . . . » 67
3.3. Annual Rate of increase of G.D.P. at factor
cost, 1961 -1972 and of Gross Fixed Capi-
tal Formation, 1961 - 1970, by Sectors » 68
3.4. Growth of Gross Domestic Product at factor
cost and of Fixed Capital Formation » 71
3.5. Twelve Program Estimates of Gross Dome-
stic Product at factor cost and Fixed
Capital Formation for the Tears 1963,1972,
and 1963, 1970, respectively » 73
3. 4 . 1 . Investment Financing Estimation Model.. » 79
4.2. Regression Coefficients and Related Mea-
sures for Investment Financing Estimation
Model » 80
4.3. Investment Financing Projection Model... » 82
4.4. Annual External Financing Requirements
for the Period 1963 - 1966 by Program. . . » 83
4.5. Summary of Information of Tables A - 6 . . » 84
3 . 5.1. Regression Coefficients & Related Mea-
sures for Import Equations » 89
5.2. Projection of Deflated Export and/or Im-
port Substitution Requirements {Xr /M s )
for 1963 - 1966 » 89
5.3. Projected Imports and Export (and/or Im-
port substitution) Requirements as per cent
8
of G.D.P. at factor cost Page 90
5.4. Imports is Exports as per cent of G.D.P.
at factor cost » 90
3 . 6 . 1 . Total Population, Working - Age Popula-
tion 1966 -1972 » 94-95
6.2. Total and Male Labor Requirements for
1972 » 98-99
Diagram One. Causal Ordering of variables in Esti-
mation Model » 81
TABLES IN THE APPENDIX
A - l . l . Gross Composition of Domestic Product at »

factor cost, 1948 - 1961. Percentage Distri-
bution by Sectors » 112 - 113
1.2. Gross Fixed Capital Formation by Sectors,
1948-1961 »114-115
1.3. Sources of Financing Gross Investment as
per cent of Gross Domestic Product at fac-
tor cost, 1948 - 1961 » 116
1.4. Sources of Financing Net Investment, 1948-
1961 » 117
1.5. Private and Public Investment as percent-
age of Gross Domestic Capital Formation. » 118
1.6. Gross Fixed Capital Formation as percent-
age of (1 ) Gross Domestic Product at factor
cost and (2) Gross National Product at
market prices » 119
A-2.1. M i d - T e a r and End of the Tear Estimates
of Population, 1951 -1961 » 119
2.2. Net National Income, Gross Domestic Pro-
duct at factor cost 1952, 1960 » 120
2.3. Average Annual Rate of Growth of the Ma-
jor Sectors of the Greek Economy, 1952 -
1960 » 121
9
A-3.1. Composition of Gross Domestic Product
at factor cost, 1963 - 1972. Direct projec-
tion of G.D.P. at 6.4% per annum » 122 - 123
1963 -1970, based on projection of G.D.P.
at 6.4 % per annum » 124 - 125
3.3. Composition of Gross Domestic Product at
factor cost, 1963 - 1972. « Low » standard
projection of G . D . P . at 6.4% per annum. » 126
1963 - 1970, based on « Low » standard pro-
jection of G. D. P . at 6.4% per annum. .. . » 127
factor cost, 1963 - 1972. « High » standard
projection of G . D . P . at 7.9% per annum » 128
1963 - 1970, based on « High » standard
projection of G . D . P . at 7.9% per annum » 129
1963-1970 » 130
factor cost, 1963 - 1972. Indirect projection
based on Table 6 » 131 - 132
A-4.1. Incremental Gross Fixed Capital Formation/
Net Value Added for Primary Production » 133
4.2. Incremental Gross Fixed Capital Formation/
Net Value Added for Manufacturing » 134 - 135
Net Value Added for Electricity, Gas &
Water works » 136
Net Value Added for Transport & Commu-
nications » 137
Net Value Added for Dwellings » 138 - 139
Net Value Added for Services » 140 - 141
A-5.1-12. Composition of TD and I. Targets cor-
responding to various levels of Manu-
facturing and Fixed Capital Formation » 142 - 165
A-6.1-12. Investment Financing Projection by
10
Programs » 166 - 169
A-7.1. Projection of Import Values, 1963-1966 » 170
7.2. Projection of Import Values, 1963-1966
Average and 1966 » 171
A-8.1. Productivity Rates, 1951 - 1961 » 172 - 173
8.2. Employment Requirements by Sectors
1972. Estimates for Program 23-27 » 174 - 175
8.3. Employment Requirements by Sectors
1972. Estimates for Program (23.5 -25)-27 » 176- 177
8.4. Employment Requirements by Sectors in
1972. Estimates for Programs 23-27, (23.5 -
25) -27 » 178-179
f
Symbols for P r o g r a m s
24/26 See Table 3.3.1, p. 66
23/27 See Table 3.3.1, p. 66
22/28 See Table 3.3.1, p. 66
21-26 See Table A-5.1, pp. 142-143
21-27 See Table A-5.2, pp. 144-145
See Tables A-5.3 through A-5.11, pp. 146-163
(23.5-25) -28 See Table A-5,12, pp. 164 - 165
ADDENDUM
See Last Page
11
P R E F A C E
In undertaking this study we had primarily two purposes

in mind: First, to design a simple and generally applic-
able procedure for making a first reconnaissance
of the growth alternatives confronting an economy com-
mitted to rapid development, and to provide some criteria
for choosing among these alternatives.* Second, to survey in
a general way and on the basis of minimum information
—such as is provided by the national accounts and re-
lated statistics— the growth alternatives open to the Greek
economy.
It should be stressed that, despite the frequent use of the
term «program» in the text, what we do in fact is to survey
a collection of alternative quantitative frameworks within
which alternative programs may be worked-out. The data
employed are strictly macro-economic, and the choice al-
ternatives are formulated in terms of the growth rates of
the major sectors of the economy. A further warning
is of the essence. Data on many aspects of the Greek
economy may not be reliable. Often the statistical
procedures employed in their derivation are not made
known to the user. Furthermore, Greek time series are
available for a very limited span of time. A good many
of them dale back to 1948, while in some instances (as is
* A somewhat similar approach was employed by H. R. Che-

nery and M. Rruno in the case of Israel. See their «Development
Alternatives in an Open Economy: The Case of Israel». The
Economic Journal, March 1962.
13
the case with imports) it makes no sense to use data re-
lating to the period prior to 1954. Nevertheless, the sta-
tistical services in Greece are becoming increasingly am-
bitious, and it may be expected that significantly superior
and more plentiful data will become available in the not
too distant future.
The report consists of three chapters and an appendix.
The first is a brief, sketchy survey of the salient features
of the Greek economy in the fifties. In the second chapter
we attempt to reduce the problem of planning resource
allocation for economic development —in general terms—
to manageable proportions. The third and last chapter
is devoted entirely to the exploration of the feasibility of
some alternative growth paths for the Greek economy over
the decade 1963 -1972. Finally, the appendix includes
a variety of supporting statistical tables and some notes
on the methods employed in the report.
Greece has recently concluded an association agreement
with the European Common Market with the prospect
of full membership some 22 years hence. It is fair to say
that, given the terms of the association, Greece may have
a small margin of time in which it must accomplish four
major objectives:
(1) It must maintain or improve the rate of growth it
experienced during the 1950ies.
(2) It must bring about a substantial redistribution of
its resources among the key sectors of economic activity.
It is especially important that the share of manufacturing
in gross domestic product rise as rapidly as circumstances
permit.
(3) The economy must become more efficient. There is
massive evidence of substantial resource misallocation.
Much of Greek industry has survived behind high tariff
walL· and an arbitrary licensing procedure. A gradual
14
but sustained reduction of protection is in order. The
highly centralized and often arbitrary interferences of
government in economic activity must give way to rational
control and planned promotional activity, while the market
mechanism is given a freer hand (where appropriate)
in the process of resource allocation.
(4) Unemployment and agricultural underemployment
must be reduced to tolerable levels, as rapidly as possibly,
even though by the end of the decade unemployment may
have largely disappeared if the Greek economy maintains
a consistently high rale of growth. Furthermore, some
significant reduction in the skewness of personal and re-
gional income distribution must be attempted, especially
through increased social consumption.
These are difficult tasks. They require a trained public
administration with a sense of purpose and commitment.
They require rapid development of a class of modern in-
dustrial entrepreneurs and managers. They require a rapid
rhe in the level of general and technical education of the
youth of the country. Every step is fraught with the danger
of serious conflict with well-established vested interests.
Furthermore, since all these measures have long-term pay-
offs, they are not as palatable politically as make-shift
day to day solutions.
15
CHAPTER 1
SALIENT FEATURES OF GREEK

ECONOMIC GROWTH IN THE
NINETEEN - FIFTIES
Introductory
World War II ended in 1945 for most of Europe.

Greece, however, continued to experience the rav-
ages of warfare with the outbreak of the civil war in
1946 which lasted until late 1949. Whatever recon-
struction was accomplished by 1950 was largely in
the form of facilities to support the national military
effort. American aid while impressive in size had to
be diverted to direct relief rather than to reconstru-
ction and development. In 1949 some 700,000 persons
or almost 10% of the population were awaiting reset-
tlement to their devastated villages, a process not
completed until 1951. Almost a third of the popula-
tion was either wholly or partly dependent on state
aid.
The dislocation of the national economy left Greece
at the beginning of the fifties with inadequate domes-
tic production of basic foodstuffs, a chaotic state
of public finances, a paralysis of the money and cre-
dit structure and an internal price structure well
above that of the rest of the world. Inflationary pres-
sures were reflected in an acute balance of payments
deficit which was is turn only kept in check by a system
of rigid import and foreign exchange controls.
Economic disorganisation and inflation were the
immediate problems facing the Greek authorities.
More fundamentally, the Greek economy suffered
from structural defects inherited from the pre-war
17
2
period, which were reflected in the fact that per cap
ita income in Greece was one of the lowest in Euro
pe. The low standard of living, in turn, led to inade
quate domestic savings and a serious deficiency in
public services, particularly in education. The pre-war
economy was characterized by a high propensity to
import, particularly basic foodstuffs which could
not be produced economically at home. Exports con
sisted largely of five crops highly subject to interna
tional price fluctuations, while the only invisible re
ceipts of any consequence were remittances from emi
grants and seamen. Domestic industry was stagnant
and highly protected. Germany had been a major
market for Greek products on a bilateral trade basis,
the loss of which seriously accentuated the postwar
balance of payments problem.
The structural transformation of the Greek econo
my seemed to focus then, as it does now, on the indus
trialization of the country. Only in this fashion,
could the persistent unemployment be reduced and
incomes and exports raised to acceptable levels. The
Government four year plan* published in 1950 con
tained the following objectives :
(a) Rehabilitation of the country's financial, mon
etary and credit system.
(b) Full development of her natural resources.
(c) Attainment of the highest possible employment
rate for the country's population.
(d) Maintenance, and if possible increase, to toler
able levels, of the people's standard of living.
(e) Achievement of balance of payments equilibrium.
* High Board of Reconstruction A. S. Α., Memorandum on

the Long Term Program for Greece. Athens, April 1950, ch. III.
18
Today, some 12 years after the publication of this
plan, objectives one and five have been largely accom-
plished, while the development of resources, a reduc-
tion of unemployment and the achievement of a
tolerable standard of living remain goals to be achieved
in full or in part.
19
II
Monetary Stability and the Balance
of Payments
The problems of inflation and the balance of pay-

ments are closely related. While impressive rates of
growth were achieved under inflationary conditions
such growth could not be sustained over the long run.
Through 1953 the increasing overvaluation of the
drachma was disguised by a system of premiums and
subsidies together with tight internal controls. With
the decision in 1951 to adopt a disinflationary policy,
the budget deficits were greatly reduced by curtail-
ed Government spending. At the same time American
aid was sharply reduced, thus limiting the amount
of counterpart drachmas which could be devoted to
investment. Strict credit and import controls were
imposed. The turning point was the devaluation of
April 1953 which established a rate of 30,000 dra-
chmas to the dollar instead of 15,000. The currency
was renominated so that in effect one dollar became
the equivalent of 30 drachmas, the present rate. The
devaluation of 1953 and the measures taken to restore
monetary stability led to a rise of confidence in the
drachma. Notwithstanding the rapid expansion of
the supply of money through the 50's the country
experienced remarkable price stability.
Despite the success in attaining and preserving
20
internal monetary stability, the financial mechanism
is not yet adequate to channel an increasing flow of
private savings into productive uses. The capital
market, still in a rudimentary stage of development,
has not become a source of capital for the develop-
ment of industry despite a boom in share prices, and
specialized institutions have not yet begun to fill the
gap. A significant part of private saving finds its way
into credit for enterprises through the medium of
mainly short-term bank loans. Thus the problem of
channelling saving into appropriate uses in order to
achieve national goals will be of primary importance
for policy makers in the coming decade.
The policy of preserving monetary stability has
received important support from the government
budget. In fiscal year 1957 the current account budget
moved into surplus for the first time and has contrib-
uted substantially to the financing of the public invest-
ment budget since.
With the relaxation of import controls following
the 1953 devaluation, imports of goods and services
(the value of ships excluded ) rose from $ 333 million to
$ 547 million in 1958. Tightened credit controls caused
some reduction in imports in 1959 but the rise was
resumed thereafter. Exports rose from a low of $ 105
million in 1950 to $ 259 million in 1958 and have
been relatively stagnant since. Exports are still highly
concentrated in a few key agricultural crops, while
imports are highly sensitive to changes in the level
of domestic income. With a substantial widening of
the trade gap, a renewed crisis in the balance of pay-
ments was avoided because of an apparent secular
rise in invisible receipts from emigrants remittances,
shipping earnings and tourism. Net invisible receipts
21
rose from $ 27 million in 1950 to $ 229 million in 1960
and in 1961 replaced exports as the principal source
of foreign exchange earnings. Without doubt, the
problem of a widening trade gap looms for the Greek
economy as a critical problem in the years ahead.
22
m
Structural Aspects
The overall performance of the economy in the

'50ies can best be gauged through an analysis of
national income statistics*. For the period 1952-1960
per capita income grew at an annual rate of 5.5%,
while gross domestic product grew at a rate of 6.2%.
This undoubtedly is a very acceptable rate of growth.
To this performance corresponds an impressive rise
in the flow of domestic saving. Domestic saving as a
percentage of gross domestic product at factor cost
(1954 prices) rose from 1.7% in 1952 to 12.8% in
1960. Correspondingly, external financing (transfer
of ships to the Greek flag excluded) fell from 8.3%
in 1952 to 3.2% in 1960. Gross fixed capital formation
as a percentage of gross domestic product at factor
cost (1954 prices) rose from 14.3% in 1952 to 22.3%
in 1960.
The structural changes over the period, however,
are fairly typical for a country of Greece's per capita
income and population. Agriculture's share of gross
domestic product dropped from around 33% in the
beginning of the decade to about 30% toward the end,
while the share of manufacturing rose from about
* Tables A - l . l through A —1.6 and A —2.1 through

A — 2.3 contain much of the relevant information.
23
16% to 19% for the same period. An investigation
of the structure of investment in the 50's discloses
that the leading sectors — the sectors which account
for the high rate of growth of the economy — were
two, namely dwelling construction and transport and
communications. The combined gross investment in
these two sectors accounts for 50% of aggregate gross
investment over the period. In sharp contrast, invest-
ment in manufacturing has remained anaemic, drop-
ping from around 20% of the total in 1950 to about
8% in 1960. This assumes special significance in the
light of the additional fact that public as against pri-
vate investment accounted for 36% of the total in
1950 and for 37% of the total in 1960.
Closely related to the sluggish development of in-
vestment in manufacturing, and the continuing reliance
on public investment, is the low and falling share of
education in the gross domestic product. From around
2% in 1948 it dropped to 1.5% in 1961. This assumes
further significance in the light of the fact that defense
expenditures as a percentage of gross domestic prod-
uct were close to 6% in 1960.
Reliable estimates of non-agricultural unemployment
over the decade are not available. The census esti-
mate for March 1961, however, brings it to around
11%, an impressively high figure (see table 1.1). Sea-
sonal agricultural unemployment on an annual basis
has also been estimated in 1960 at between 10% and
25% depending on the region.* Thus, Greece at the
end of a decade of rapid growth faces a serious
unemployment problem. Emigration, which by 1961
* See A. Pepelasis and P: A. Totopoulos, Labor Surplus in

Greek Agriculture, 1953-1960. C.E.R., Athens, 1962.
24
reached 58,837 is contributing toward an immediate
partial solution of the problem, but in a manner
which deprives Greece of skilled hands and which may
thus become a serious obstacle to industrial growth
over the next decade. (See table 1.2).
Income distribution statistics in Greece are scanty
and unreliable. This is especially true for personal
distribution. Some information is available, of course,
on regional income distribution. The per capita in-
come of Athens is probably 5 times the per capita
income of mountain communities. Thus, while Athens
enjoys a standard of living comparable, say, to that
of Italy, the standard of living of mountain commu-
nities is closer to that of Asiatic countries. Such evi-
dence as is available on personal distribution points
to a highly skewed income distribution. Thus partic-
ipation in the growth of the last decade has been
highly unequal, both from a personal and from a re-
gional point of view.
Concluding remarks
Greece has recently concluded an association agree-

ment with the European Common Market with the
prospect of full membership some 22 years hence.
It is fair to say that, given the terms of the association,
Greece has a small margin of time in which to ac-
hieve the structural transformations needed for sur-
vival in the European Common Market.
This report is an attempt to outline various alter-
native growth paths for the Greek economy over the
next decade, and to identify the major obstacles to
be overcome. It deals with macro-magnitudes, and
especially with their measurable aspects. Thus it is
25
only a first step in the direction of charting the proper
course of the economy.
TABLE 1.1. Active Population Estimates for 1961
Total Active Population, (000) 3,663

Non-agricultural active population, (000) 1,708
Unemployed, (000) 239
Unemployed as % of total active population 6.5%
Non-agricultural unemployment, (000) 185
Non-agricultural unemployment as % of
non-agricultural active population 11%
Estimates derived from a 2 % sample drawn from the

1961 Census returns. (National Statistical Service of Greece).
Thus the estimates are for March 1961.
TABLE 1.2. Number of Persons Permanently Emigrating

from Greece, 1955-1961.
1955 29,787
1956 35,349
1957 30,428
1958 24,521
1959 23,684
1960 47,768
1961 58,837
S o u r c e : National Statistical Service of Greece.
26
CHAPTER 2
PLANNING RESOURCE ALLOCATION

FOR ECONOMIC DEVELOPMENT
ι
Economic Development : A Decision Problem
for the Public Policy Authority
Not too long ago economists and social scientists

engaged in heated debate concerning the advantages
of the planned economy over the decentralized, market
economy, and vice versa. Despite the fact that some
solid scientific work went hand in hand with this debate,
its tone was value-laden and the alternatives con
sidered were, almost invariably, extreme versions of
the planned and the market economy. The choice
seemed to be: Freedom or Serfdom.
The debate is still going on, but its character has
undergone radical change. The tone has become prag
matic. The question is not whether to design a mo
nolithic society or to remove all the obstacles to indi
vidual action, but rather how to design an economic
organization which permits attainment of acceptable
material goals while preserving moral values.
As is typical, events have anticipated the change
in intellectual climate. In the two decades since the
last world war the underdeveloped nations of the
world, one by one, resolved that they would marshal
their resources in order to achieve a rapid rate of eco
nomic growth. Once this decision was taken, the die had
been cast. Somehow, it seems, rapid economic growth
of underdeveloped economies is not feasible without
29
conscious design. Thus the question is not, to Plan
or not to Plan; it is How to Plan.
This universally recognized need for intervention by
the public authority in the overall allocation of re-
sources for the purpose of speeding up development
may be attributed to two sets of reasons.
First, there are demonstrable imperfections of the
market economy in the less developed countries. They
include the following:
1. Scarcity of entrepreneurship (of the right kind).
2. Lack of reliance on the stability of the institutions.
3. Inadequate infra-structure.
4. Technological backwardness and inefficiency.
5. Scarcity of market information.
6. Widespread monopoly.
7. Extreme inequality in the distribution of wealth.
Removal of these imperfections is a staggering task
calling for planning. Furthermore, it can only take
place pari passu with economic development.
Second, there exist certain universal imperfections
of the market economy which are especially relevant
to economies aspiring to experience a rapid rate of
growth. These include the following:
1. Even a perfectly competitive economy would fail
to lead to a correct (efficient) allocation of resources
in the presence of external economies. This is espe-
cially critical for underdeveloped countries — where the
margins for exploitation of external economies are
very substantial.
2. We do not know much about the dynamic prop-
erties of the competitive system. Such experience
as we have, however, points to the fact that it is
not in a position to effectively re-allocate resources
30
on a massive scale in a short period of time, as, for
instance, in war. Underdeveloped countries are com-
mitted to a rapid improvement in their position and
face up to the need, therefore, to depart from the
strictures of the competitive system — wherever this be-
comes necessary.
31
π
Planning Resource Allocation as an
Optimization Problem
In discussions concerning planning for development

the center of the stage is occupied by debates concer
ning the investment criteria to be employed by the
policy maker. Why this emphasis on investment cri
teria rather than on resource allocation? Strictly
speaking, it is resource allocation in its general sense
that must occupy the center of the stage in such dis
cussions. Resource allocation, however, is often tele
scoped into investment allocation for the following
reasons:
1. It is often the case that, rightly or wrongly, capi
tal is considered as the key, if not the only scarce re
source in underdeveloped countries.
2. The investment decision may be viewed as the
focal point for a host of resource allocation decisions.
3. Economic growth as conventionally measured is
intimately related to the process of capital formation.
This resource allocation problem confronting the
policy maker in an economy intent upon rapid growth
may be viewed as an optimization problem. Such a
general formulation of the problem may not be ope
rational, and may be of only limited interest to the
policy maker. Nevertheless, it is instructive to consid
er it in some detail.
32
The decision problem confronting the policy maker,
if cast in the framework of optimization, must contain
information on the following: 1. The collection of alter
natives among which he is to choose. This collection
may be called the choice set. 2. Not all alternatives
contained in the choice set are feasible. It becomes
necessary, therefore, to specify a sub-collection of
the alternatives which are feasible. This sub-collection
is called the feasible subset. 3. Finally, an ordering or
a valuation must be imposed on the alternatives in
the choice set (and, therefore, on those of the feasible
subset). This preference ordering of the policy maker
may be represented by a numerical function (which
assigns values to each alternative in such a fashion
that a preferred alternative is always associated with
a higher value) that goes under the name of social
welfare function.
The choice set may be defined in a number of alter
native ways. If we wish to be very elaborate we may
define it as the set of time patterns (ad infinitum) of
vectors (ordered η-tuples) specifying the composition of
consumption for every present and future member of the
community. More simply, we may define it as the set
of time patterns of per capita consumption (ad infini
tum). In both instances the time horizon is infinite,
but in the second instance substantial simplification
is achieved by abstraction both from the structure of
the output available for consumption, and from its
distribution among the constituent members of the
community.
In practice, it is customary to choose a finite horizon.
This may be justified on the grounds that the policy
maker is concerned with the present generation — in
the sense that he wishes it to share in the gains from
33
3
growth. Under these circumstances, however, the pol-
icy maker ought to take into account the terminal cap-
ital stock — since its magnitude will affect the course
of future consumption. We assume, of course, that the
policy maker is not entirely indifferent to what will
happen to the next generation. Thus the choice set
in the case of a finite horizon ought to consist of ele-
ments the first component of which is the time pat-
tern of consumption per capita (or the time pattern
of vectors of the form mentioned above), while the
second component is the terminal capital stock. (Cap-
ital stock may be viewed either as an aggregate val-
ue or as a vector, depending on the complexity of
the model proposed). If we broaden the concept to
include human capital, then education, health and sim-
ilar expenditures over the planning period, whose im-
pact on the economic process will become felt after the
terminal date, may be incorporated into the decision
model in a fashion similar to that employed in the
case of physical capital — namely, as a component of
terminal capital stock.
If we wish to work with a finite horizon, while
avoiding the specification of the terminal capital stock,
we may define the choice set as a set of time patterns
of per capita income, provided we require that the time
patterns to be included in the set exhibit a certain
uniformity with respect to growth. This actually is
the popular procedure.
The policy maker is not free to choose any element
of the choice set (no matter how defined). He is restrict-
ed to the feasible subset. What time patterns are
feasible depends on the initial state of resource avail-
ability, the initial state of technology, and the initial
state of economic and social organization. Economists
34
have made significant progress in characterizing fea-
sibility in terms of the initial state of resource availabi-
lity and technology. Much less is understood, however,
about the impact of institutions and organization on
the feasibility of alternatives. Often the economist
talks about the absorptive capacity of an economy in
an attempt to summarize the force of this factor.
Any serious attempt to characterize the feasible sub-
set requires substantial disaggregation with respect
to the composition of output over time. Activity anal-
ysis, input-output techniques, and similar devices now
under development have gone a long way toward
providing an operational framework along these lines.
The definition of the feasible subset reflects the defin-
ition of the choice set. If the choice set is defined in
terms of time patterns of per capita consumption, the
time pattern of the distribution of consumption is
relevant to the feasibility question by reason of the
fact that it affects the time pattern of population
growth. If the choice set is defined in terms of time
patterns of per capita income, then an additional prob-
lem relating to feasibility arises. To each time pattern
of per capita income corresponds a set of time patterns
of distribution of income — namely, the set of all such
time patterns of income distribution which yield aggre-
gate saving (over time) equal to that required to fi-
nance the corresponding capital formation (over time).
Naturally, for some patterns of income per capita, this
set may be empty — namely there may be no income
distribution which will yield the requisite saving, and
the corresponding time patterns of per capita income
will be judged as being not feasible.
Not much can be said on a priori grounds about the
preference ordering of the policy maker (the social
35
welfare function). Certain things emerge, however,
from the fact that, ceteris paribus, more income (or
consumption) per capita is preferred to less. The fea-
sible subset contains a subset of undominated time pat-
terns. A pattern of income (or consumption) per capita,
say T, will be called undominated, if there exists no other
pattern which contains at least one value which is larger
than the corresponding (in time) value of Y and no val-
ue which is smaller than the corresponding (in time)
value of T. Given our assumptions, optimization calls for
the selection of a pattern from the undominated subset.
Strictly speaking, the economist's role is restricted
to characterizing the undominated subset — leaving
it to the policy maker to proceed with the choice of
an element belonging to that subset. As a matter of
fact, however, the task of the economist usually in-
cludes the formulation of alternative preference order-
ings for the use of the pulbic policy authority. He
may and often does exert significant influence over
the choice through the manner in which these alterna-
tives are presented.
36
Ill
Growth, Income Distribution
and Employment
It would be an unusual policy maker that would

concern himself only with the time pattern of per cap-
ita income. Typically, additional aspects of the state
of the world are relevant to his decisions. Among
them the most characteristic are employment and
the distribution of income. Incorporation of such addi-
tional elements into the decision-making process may
take the following form. To each feasible time pattern
of income per capita is associated a set of time patterns
of income distribution and employment, namely,
those which are consistent with the time pattern of
income per capita in question, given the technological
(and social) environment and resource availabilities.
The social welfare function may still be defined in terms
only of time patterns of income per capita, but the
policy maker may be thought of as maximizing it,
subject to the constraint that unemployment (over
time) be not larger than some given level, and that
the income distribution (over time) possess certain
characteristics.
We have already observed (section II), that to
each (feasible) pattern of income per capita corresponds
a set of patterns of income distribution. Thus, setting
the characteristics of income distribution may be ex-
37
pected to restrict the area of choice of the policy mak-
er with respect to the growth pattern of income per
capita. It is often argued that a reduction in the de-
gree of inequality of income distribution will lead to
a reduction in aggregate capital formation, and there-
fore, to a reduction of the rate of growth of per capita
income. This may well be true, but the argument
overlooks the possibility that maintenance of a high
degree of income inequality may make higher rates
of growth of per capita income non-feasible, as a result
of the loss of interest on the part of a large compo-
nent of the populace in growth itself. Also, it is not
clear that inequality of income distribution in under-
developed countries tends to foster economic growth.
Conspicuous consumption and orientation toward lux-
ury imports — which characterize the spending pat-
tern of the «lucky few» in underdeveloped countries,
also places limits on growth. Above all, it ought to
be kept in mind that an ingenious fiscal policy com-
bined with special measures to develop a capital market
with wide participation on the part of the large num-
bers of the community may enlarge the set of income
distribution patterns which are consistent with a giv-
en rate of growth. In other words, the overall propen-
sity of the community to save is itself a variable which
ought to be taken account of in the formulation of
the feasible set.
Similar questions may be raised with respect to
unemployment. To be precise: Is a high rate of growth
of income per capita consistent with the early elimi-
nation of involuntary unemployment? (It may be as-
sumed that no such inconsistency arises in the long
run).
We look to the capital-labor ratio as an indicator
38 1
of the impact of investment (growth) on employment.
(We are making no distinction here between average
and marginal capital-labor ratios). The capital-labor
ratio may be affected either by substitution of labor
for capital (and vice versa) in the production of a
particular product (change of process), or by a change
in the structure of output (change of product mix).
The extent to which we must sacrifice growth of in-
come per capita in order to obtain a given reduction
in the volume of involuntary unemployment depends
on (a) the shape of the production function for each
product, and (b) the extent to which a shift from
products for which the capital-labor ratio is rela-
tively high to products for which it is relatively low
can be carried out without reducing the social valu-
ation of the resulting output.
Many assumptions can be made with respect to the
production function. The following seems reasonable.
For each scale of output the cost-minimizing compo-
sition of labor and capital inputs will not show much
sensitivity to moderate changes in the prices of the
inputs. Furthermore, in terms of the capital-labor
ratio, it is likely that it is positively related to scale
and standardization. Thus, with expanding markets
in a developing economy, it may be expected to rise
for cost-minimizing combinations. On this score,
therefore, it looks as if the adoption of labor inten-
sive processes will be carried out at the expense of
growth. It may be counter argued, of course, that
the market wage rates in underdeveloped countries
depart significantly from the correct «shadow» rates
— and that labor-intensive processes would have
been consistent with growth if the correct valuation
were placed on labor. Such shadow prices, however,
39
must be inferred from the plan itself — that is to say,
they must take account of the impact on the labor
market of the unfolding of the development program.
This may tend to limit seriously the force of the coun-
ter argument.
If the income and price elasticity of the international
demand for products in which the underdeveloped
country has a comparative advantage is high (it
being kept in mind that labor is in relatively abun-
dant supply), then a shift from products for which
the capital-labor ratio is relatively high to products
for which it is relatively low could be carried out
without substantial sacrifice in growth. It is quite
likely, however, that this is not the case and that,
in order to maintain a rate of growth of exports consist-
ent with the growth of their national income, un-
derdeveloped countries will be forced to maintain a
structure of output which may not readily absorb
their relatively abundant resources.
It goes without saying that, in the presence of per-
sistent unemployment, every effort should be made to
explore the possibilities for introducing labor-intensive
techniques without decreasing the rate of growth of
the economy. The sector of construction (building,
public works) and small industry, in general, may of-
fer some opportunities. Effort should be exerted also
to discover changes in the product-mix which reduce
the overall capital-labor ratio without interfering with
growth. In view of the argument above, however, it
is likely that, despite all such efforts, the policy mak-
er will be faced with a choice between higher rates
of growth and higher early levels of involuntary unem-
ployment, on the one hand, and lower rates of growth
and lower early levels of involuntary unemployment,
40
on the other hand. Under these circumstances it makes
sense to attack the unemployment problem as a
distributive problem and as an opportunity for work-
er-education. Public investment in skill-developing
training programs makes good sense. For it ought to
be kept in mind that in. underdeveloped countries
some types of labor are in extremely short supply,
at the same time that other types are in excess sup-
ply. Raising the minimum age for entrance in the
labor force, lowering the retirement age and distrib-
uting employment more equitably (by eliminating
or restricting overtime arrangements) also makes
good sense. Finally, if all these measures prove in-
adequate, the policy maker may consider undertaking
some special, labor-absorbing projects. All these meas-
ures probably imply some reduction in the imme-
diate prospects for growth. The policy maker would
be well advised, therefore, to investigate in detail the
relationship between growth and unemployment in
its specific historic context, formulate explicitly his
preferences, and then proceed to make his decision.
At the beginning of this section it was suggested that
the social welfare function (representing, as it does,
the preference ordering of the policy maker) could
be defined in terms of income per capita, and be max-
imized subject to the constraint that unemployment
(overtime) does not exceed some given level. It is
also possible, if the unemployment problem occupies
the center of the stage, for the social welfare function
to be defined in terms of employment, and to be max-
imized subject to the constraint that the annual
rate of growth of the economy be not lower than
some specified rate.
41
rv
Sub-optimization in a Mixed Economy
The preceding discussion represents the process

of resource allocation for development as a process
of optimization by the policy maker. Optimization,
however, is a very exacting type of behavior. It re-
quires (a) knowledge of the consequences of every
alternative decision or choice, and (b) the ability to
place a valuation on all such consequences. Policy
makers are unlikely to possess this kind of knowledge
concerning the consequences of alternative decisions
and the capacity to place a valuation on all of them.
Thus, the process of choice or decision by the policy
maker is probably one to which we can at best ascribe
limited rationality. Instead of speaking of optima,
we should rather speak of acceptable jstates gf^the
world, in contrast to unacceptable states. Instead of
speaking of complete knowledge of the consequences
of each alternative decision, we should rather speak
of limited knowledge of the consequences of decisions
which are within the experience of the policy maker.
Thus, the process is one of search for improvements in
a step by step trial and error fashion which may or
may not lead to an optimum, depending on its dynam-
ic properties.
How detailed (disaggregated) should the targets
set by the policy maker be? This necessarily depends
42
on the kind of economic and social organization in
which he is operating. In a fairly centralized econo-
mic organization the policy maker's targets may be
characterized by a fairly detailed «bill of goods». In
contrast, in a highly decentralized competitive econ-
omy, these targets may be cast in highly aggregative
terms, as are exemplified by terms such as income
per capita, consumption per capita, and so forth. We
shall be concerned here with intermediate type or
«mixed» economic organizations. The targets of the pol-
icy maker in such mixed economies may be expected to
exhibit a fair amount of disaggregation. At a minimum
they must include information on the role of the major
sectors of the economy (such as agriculture, manu-
facturing, construction, services, etc.). Naturally, more
detailed breakdowns may be necessary for a thor-
ough investigation of the feasibility of the program.
The emerging picture of the policy maker's choice
process in a mixed economy may be summarized
as follows: First, he considers a range of alternative
targets which pass the test of acceptability in
terms of his valuation scheme. Next, he exam-
ines their feasibility, one by one. Their feasibility
having been assured, in principle, the policy maker
must determine the instruments to be employed in
achieving each of them. If the acceptable, feasible
targets are two or more, additional choice criteria
may be introduced which restrict the number of eli-
gible programs to one. Such criteria may be expressed
>n terms of the rate of growth of per capita income,
along with certain structural and distributional char-
acteristics associated with the growth pattern. Thus,
it becomes possible for the policy maker to select
cine among the acceptable, feasible programs. As the
43
execution of the program proceeds, the policy maker
may gain additional information which may affect
even his valuation scheme. Thus, the program is in
a process of continuous revision on the basis of the
«feedback» of the system.
Target-setting in a mixed economy does involve
the age-old problem of comparative advantage, al-
beit in a highly aggregative sense. Do we expect all
sectors to grow at the same rate as the economy as a
whole, or do we expect some to grow faster and others
more slowly than the economy? It is characteristic of
the best-known formal growth models (von Neumann)
that they imply a proportionate growth of all sectors.
This conclusion is reached because of the exclusion
of such considerations as resource endowment, interna-
tional trade, changes in the quality and quantity of
factor supplies, scale economies, non-homogeneity
of the consumption function, and so forth. It comes
as no surprise, therefore, that sectors in growing eco-
nomies tend to grow at different rates. Interestingly
enough, however, this variation in sector patterns
of growth exhibits strong international uniformity.
Recent work (Clark, Kuznets, Hoffman, Chenery)*
* C. Clark, The Conditions of Economic Progress, 3rd ed.

London, 1957.
S. Kuznets, «Quantitative Aspects of the Economic Growth
of Nations: II. Industrial Distribution of National Product and
Labor Force». Economic Development and Cultural Change,
July 1957, 5, suppl.
W. G. Hoffman, The Growth of Industrial Economies. Man-
chester, 1958.
H.B. Chenery, «Patterns of Industrial Growth», American
Economic Review, September 1960.
44
»
leads to the conclusion that we can talk in terms of

a «standard» pattern of sector growth. Ghenery esti-
mates this standard pattern by expressing per capita
value added for each sector as a function of per cap-
ita income and population. (Similar estimates are
made for imports). Deviation from these «predicted»
values for the various countries considered are much
smaller than would have been expected on a priori
grounds. The share of value added by manufacturing
exhibits the highest rate of growth, while the share
of value added by services exhibits the lowest (positive)
rate of growth and the share of the primary sec-
tor actually declines, with rising per capita income.
These patterns reflect the changing structure of both
demand and supply. That is to say, they reflect both
the growth in.the final use of industrial products and
the substitution of domestic production for imports,
which accompany the growth of per capita income.
The magnitude of the impact of universal as against
particular factors in the growth pattern of countries
is truly impressive. This is not to be taken to mean,
however, that the particular factors which incorporate
a country's comparative advantage are without signif-
icance. It merely means that they explain much less
than one is inclined to attribute to them on a priori
grounds.
In view of the presence of these powerful universal
factors, it makes sense to take account of them in
setting the targets. Thus, the policy maker may be-
gin by considering the «standard» structure (in terms
of relative shares of sectors) which corresponds to
some acceptable target income per capita. Then he
may ((distort» this pattern in a fashion which takes
account both of the historically given starting point
45
•
of the economy in question and of the direction in

which comparative advantage may best be sought.
A country well endowed with natural resources may
well afford a significantly larger share of primary
output in total output. A country poorly endowed
with such resources might be well advised to put
emphasis on the development of human skills—and
might plan, therefore, to «overdevelop» its manu-
facturing sector. In selecting the «deviations» from
the «standard» structure, the policy maker may,
initially, take as a guide the experience of economies,
akin to his own, whose growth pattern he considers
acceptable. Selection of the structure (in terms of
relative shares of sectors) for the terminal year and
the (annual) ratio of gross fixed asset formation to
total ouput (gross domestic product) determine the
annual rate of growth of per capita income, given the
sectorial output-investment ratios and the rate of
growth of the population. Furthermore, it determines
a complete investment program by sectors year by year.
Of course, such a program may not be feasible. The
flow of domestic saving (private and public) and
of external financing may be inadequate to the task.
The policy maker need not accept the historically gi-
ven saving propensity, but there are limits (institu-
tional and political) within which it may be amenable
to manipulation. The same is true with respect to
external financing. Alternatively, the balance of pay-
ments may be the bottleneck. The imports associated
with the program may be estimated in a more reliable
fashion than exports, which generally are rather dif-
ficult to forecast—and it would pay to consider alterna-
tive rates of growth of exports. Finally, labor may be
the bottleneck. If estimates of labor productivity by
46
sectors are available, then the labor requirements of
the program may be estimated and contrasted to
labor available over the life of the program.
Since developments in the future (e.g. affecting ex-
ternal financing, etc. ) cannot be predicted with certain-
ty, the policy maker must develop a decision rule or a
strategy which would specify the program to be se-
lected (or shifted to) for each alternative situation,
the situation being defined in terms of the flow of
domestic saving, the structure of the balance of pay-
ments, and so forth.
Of course, a program of the type described here may
not be feasible because of hidden structural incon-
sistencies. Only a thorough analysis of demand, side by
side with sector outputs and the import-export stru-
cture, can provide assurance that the program will
not run up against structural imbalances. If the
data and the computing facilities are available,
such studies ought to accompany each program. If
they are not, then a macro-program of the type consi-
dered may be the best the policy maker can undertake.
It is rather obvious that the process of program se-
lection described here is not necessarily one of opti-
mization. In setting his targets, the policy maker was
first guided by analogy. There is nothing in this that
suggests optimization. In the second round, however,
the targets were revised in a fashion that took account
of the direction in which comparative advantage might
best be sought or developed. This second round sug-
gests that the procedure may not be devoid of a search
for improvements, if not for optima. Indeed, it may
be suggested that there exists an optimization process
that would lead to results not too different (that is
to say, not different qualitatively) from those obtained
47
through the process described here. Its outline is as
follows: The output—investment ratio for the economy
as a whole is the weighted average of sectorial output-
investment ratios. Since the rate of growth of nation-
al product may be shown to be equal to the product
of some given ratio of aggregate investment to nation-
al product times the overall output-investment ra-
tio, maximization of the output-investment ratio is
equivalent to the maximization of the rate of growth
of the national product. This maximization is effected
by a redistribution of investment by sectors. Natu-
rally, such maximization of the output-investment
ratio must be carried out subject to certain constraints
—the constraints taking the form of minimum require-
ments of sectorial output for consumption. The ef-
fort to «overdevelop» the sectors or activities wherein
may lie the country's comparative advantage may be
viewed as being akin to the effort to «overdevelop»
the sectors with the highest output-investment ratios.
This comment is in the way of an aside intended to
establish that there exists a possible rational interpre-
tation for a seemingly arbitrary procedure.
The selection of a strategy of this type in a mixed
economy, and therefore of a program (given relevant
developments in the rate of domestic saving, etc. ),
has a tentative character. The flow of investment by
sector has been determined on the basis of fairly gen-
eral, rough-and-ready criteria. Nothing has been set-
tled concerning the micro-investment decision — the
investment decision by product, location, etc. Tet,
the macro-pattern of investments is determined by
the multitude of micro-investment decisions — and
the two, therefore, must be brought together into a
consistent scheme. It is a characteristic of mixed eco-
48
nomies, of the type considered here, that this may be
sought after but that it cannot be assured. If the pro-
gram is to have any meaning, it must be given some
«teeth». The policy maker must undertake to promote
and assist in the financing of an investment pattern
of the general structure and order of magnitude that
is incorporated into his program. Sector-oriented de-
velopment corporations may be established with mixed
entrepreneurial - banking responsibilities. The larger
financing institutions must be urged or directed to
accept the overall pattern of investment incorpo-
rated into the program. All this be as it may, there
are no grounds for expecting that the private sector
will conform all-the-way. All that may be hoped for
is that the realized pattern of investment is in the
direction and of the order of magnitude of the invest-
ment program.
In fact, there is good reason for not wanting the
realized pattern of investment to exactly match the
programmed investment. After all, the criteria employ-
ed in setting the macro-targets are themselves of a
rather tentative character. If sound criteria are employ-
ed in the allocation of investment at the micro-level,
then a superior pattern than that anticipated (at the
macro - level) may well emerge. For this to be the case,
however, it is essential that well thought-out and so-
cially desirable investment criteria be adopted by
the investment decision makers as well as by the fi-
nancing institutions. Such criteria must take into ac-
count the total impact on the economy of the invest-
ment in question, such estimates of the impact being
based on a correct valuation of the benefits to be derived
and the costs to be incurred. A variety of such criteria
are available in the literature. The thing to keep in
49
4
mind is that almost any of them is better than no
criterion in the context of an underdeveloped economy.
Given some list of specific projects, the application of
some investment criterion produces a hierarchy, an
ordering of the components of the list on the basis of
their social desirability. An element of arbitrariness
creeps into the procedure. The criterion orders the pro-
jects in the list. It says nothing about projects not
included. Thus the selection of alternatives is crucial
to the correct application of the criterion. Furthermore,
the specification of the alternative projects is itself
crucial to the outcome. How a project is defined, what
it includes and does not include may well determine
whether it is selected or not. If external economies are
present (or, indeed, diseconomies, as in the case of
transport), appropriate enlargement of the project
leads to their internalization, making the task of esti-
mation of their impact easier and its selection more
likely than would have been the case otherwise.
It is not enough for the private sector to adopt
socially beneficial investment criteria. Investment
possibilities must be discovered. The lists of projects
must be imaginative. It is essential, therefore, to de-
sign a fairly decentralized organization with sector
and regional representation which will be devoted
to the search for investment opportunities. Search,
discovery, selection, promotion are critical functions
which must be provided for. They are the functions
typically associated with the entrepreneur western-
style, the kind of functionary who is in very limited
supply in underdeveloped economies.
If the private sector is to function adequately to
the task, it is essential that it be rewarded for success
and that it be penalized for failure. Thus, competitive
50
pressure must be fostered, privileged positions must
be threatened, barriers to entry must be removed.
Effective search takes place only under pressure of
this kind. This is not an argument for the removal
of all pegs, of all protection. Rather it is a warning.
Protection is strong medicine that may well kill the.
patient if liberally administered.
This plea is intimately related to the task of making
the ((signalling» mechanism (the market mechanism)
operate in an efficient manner. Market prices, if they
are to perform their role in resource allocation, must
give information on relative scarcities. In some instan-
ces, given the presence of external interdependencies,
this may not be feasible — and the policy maker must
impose his own estimates of the «correct» accounting
or shadow prices either directly or indirectly through
fiscal measures. More important yet, he should explore
a wide range of possibilities for promotion of private
activity in the right direction by providing a range
of activities and services which (given the market
mechanism) would lead the private sector to make
correct resource allocation decisions. This amounts
to bringing about an internalization of external eco-
nomies when the public and the private sector are
taken together. In all instances in which the market
mechanism can function efficiently, it should be al-
lowed to do so. This involves more than antitrust poli-
cy. It involves careful design of the large variety of
government regulations and measures, including espe-
cially indirect taxes of all types, so that their total
impact might not lead to a reduction of the efficiency
of the system. Above all, the policy maker must re-
sist the temptation to solve distributive problems by
playing with the price mechanism, where this is insti-
51
tutionally and politically feasible.
It must have been noticed that in discussing the re-
lationship between the macro-plan and the micro-
decisions we have been rather vague. This is a reflec-
tion of the state of our thinking or, better yet, the
state of our ignorance. The co-ordination of economic
organization — in the sense of information processing,
communication, decision — to resource allocation is
a problem that lies at the frontier of our discipline.
The need to give answers to the pressing questions
of our times may force us to improve our understand-
ing of the problem. As things stand now we have a
fair understanding of the manner in which organiza-
tion relates to resource allocation in the case only of
two polar extremes — the case of the completely cen-
tralized and the completely decentralized economy.
The organization-allocation relation for a mixed eco-
nomy remains unexplored. Thus experimentation with
alternative organizational patterns is a sound prescrip-
tion for the policy maker. The gains from such ex-
perimentation may be expected to outweigh the losses.
52
CHAPTER 3
GROWTH ALTERNATIVES
FOR THE GREEK ECONOMY
1963 -1972
ι
Introductory
In what follows we present the results of a quanti

tative investigation of alternative growth paths for
the Greek economy, along the lines suggested by the
preceding chapter. Our procedure is outlined imme
diately below.
(1) We begin with a comparison of the Greek struc
ture for two selected years (1952, 1960) with the
standard structure derived from Chenery's internation
al coefficients* for a country with the per capita in
come and population of Greece for the two selected
years. The «structure» in this context is characterized
by a table of shares in gross domestic product at fac
tor cost of primary production (agriculture and min
ing), manufacturing, electricity, and gas and water
works, transport and communications, construction,
and services.
A similar comparison is carried out between two
distinct projections of the Greek structure to year
1972 with the corresponding standard (Chenery)
structure for 1972. These comparisons are intended
to reveal the structural peculiarities of the Greek eco
nomy.
(2) Second, we formulate alternative growth and
* Chenery, op. cit.
55
structural targets for the Greek economy for 1972.
The growth-target alternatives are expressed in terms
of the ratio of gross fixed capital formation to gross
domestic product at factor cost, rather than directly
in terms of the annual rate of growth of domestic
product or of per capita income. This ratio is assigned
(roughly) four values, one of which is clearly below
while another one is clearly above the 1960, 1961 ob-
served ratios. All are higher than the ratios observed
prior to 1960. Three structural-target alternatives are
considered. They are formulated in terms of the rela-
tive shares of manufacturing and primary production.
In all three instances, the target share of manufac-
turing is higher that the projected share, and it is
higher also than the standard share for the per capita
income and population involved. Thus an upward
deviation from both the standard and the projected
share of manufacturing is introduced, reflecting the
judgment that Greece belongs to that group of coun-
tries which must seek to develop their comparative ad-
vantage in activities requiring a relatively high level
of human skills.
The target share of agriculture is taken at most as
high as the projected share, but definitely higher than
the standard share (for the relevant per capita income
and population). This reflects the view that for the
period under consideration a reduction from the pre-
sent to the standard share, though conceivably desir-
able, is not feasible.
The computation of twelve alternative «programs»
is carried out on the basis of the following information:
(a) The alternative «given» ratios of gross fixed capi-
tal formation to gross domestic product at factor cost;
(b) the alternative structural targets for 1972.
56
(3) Third, we consider the feasibility of each pro-
gram in terms of its financing requirements. A sim-
ple econometric model is formulated which yields pro-
jections of private saving, government saving, and
depreciation based on recent Greek experience. These
projections lead to a specification (one for each of
the twelve programs) of the requisite amount of ex-
ternal financing as a residual. This makes it possible
to evaluate the overall feasibility of each program in
terms of the capacity of the economy to finance it.
This test, it ought to be stressed, is applied only
to the first four years of each program, namely to the
period 1963-1966. The reason for this restriction of
the test is quite straightforward. The projections of
domestic saving may be trusted for the next 4-year
period, but become less believable as we extend them
into the future.
(4) In a similar fashion, estimates of the value of
imports (goods and services) are made for each of the
programs for the period 1963-66. Combining for each
program the estimate of the value of imports with the
external financing requirement (discussed in the pre-
ceding section), after due allowance for the net flow
of invisibles, we determine the export and /or import
substitution requirements for the 4 - year period in
question. A comparison of these requirements with
the recent performance of exports provides a measure
of the magnitude of the «balance of payments» prob-
lem for each of the alternative programs.
(5) Finally, the labor requirements for each of the
programs are determined on the basis of labor produc-
tivity estimates for each of the sectors under con-
sideration. The aggregate labor requirements are con-
trasted to total labor supply for 1972. This consti-
57
tutes the third and last feasibility test.
Certain general observations about the approach
are in order.
(1) The targets for each of the programs have not
been derived from a formal optimization procedure.
They were arrived at in a rather intuitive way from
(a) recent Greek experience, (b) analogy with the
standard international pattern, (c) certain beliefs
concerning the direction in which the «optimum»
structure of the Greek economy may lie. It was point-
ed out in the preceding chapter that, if a technolog-
ical coefficients table and demand elasticity estimates
were available, a linear program could have been
designed which would have provided an optimization
underpinning to the procedure.
(2) The targets are stated in terms of very broad
aggregates. This reflects both the unavailability of
important data at the micro-level, and the view that
the organization of the Greek economy lends itself
better to planning at this level.
(3) All series in the various programs (sectorial
values added, investment, etc.) are assigned their
«long-term» values. Short-term fluctuations are not
considered anywhere in this report.
(4) The approach employed departs significantly
from what has become accepted practice in program-
ming at this level of aggregation. All projected (pro-
grammed) values may be thought of as long-term
equilibrium values. It goes without saying that, in
the absence of structural balance (consistency) tests
in terms of a technological matrix and a bill of goods
vector, this assumption is rather shaky. The reader
is asked, therefore, to consider the alternative programs
presented in this report as rough outlines of what a
58
fully worked-out program ought to be.
(5) Quite apart from the main argument, a variety
of measures on aspects of the Greek economy have
been prepared as tools for formulating, implementing,
and testing the programs. We sincerely hope that
they may be of use to other research workers.
59
II
Some Structural Comparisons
A glance at table 3.1 (and the related background

tables A-3.1 through A-3.8 in the Appendix) brings
out certain striking facts. The first striking observa-
tion emerges from the comparison of columns 1 with
2 and 3 with 4. The standard international coefficients
of Chenery yield an estimate of the structure of the
Greek economy which is surprisingly close to the
observed structure for the years 1952 and 1960. This
is especially true of manufacturing and agriculture
for 1960, which for the purposes of this report are
the crucial sectors. Thus Greece seems to have under-
gone more or less «typical» structural changes dur-
ing the 1950's.
It is worth noting, however, that the deviations of
the observed shares of agriculture and manufacturing
from the standard shares in 1952 — deviations which
largely disappear by 1960 — were in the «right» di-
rection, namely they favored manufacturing at the
expense of agriculture. This is borne out by the compar-
ison of columns 5 and 6 with column 7. Column 5
is based on a projection to 1972 from the relevant
sectorial rates of growth over the period 1952-60.
(See table A-2.3). It will be noted that the projected
share of manufacturing rises to 24%, while the stand-
ard estimate for an equal rate of growth (column 7 ) is
60
25%; and that, while the projected share of agri
culture in column 5 is 24%, it is 2 1 % in column 7. This
contrast is intensified in the comparison of column
6 with column 7. Column 6 is based on a projection
of the net value added by each sector derived indirectly
from a projection of the time patterns of sectorial invest
ment in the period 1952-60. (See tables A-3.7, A-3.8).
According to column 6, it would seem that continua
tion of the historical investment pattern would lead
to a fall in the share of manufacturing from 19.1%
in 1960 to 18.1% in 1972. Thus there seem to be for
ces at work which, unless reversed, would lead the
Greek economy away from its internationally «typi
cal» position, and in the «wrong» direction.
Table A-1.2 is highly informative in this connection.
The following observations emerge directly from its
perusal. (1) The combined gross fixed capital forma
tion in primary production, manufacturing, and elec
tricity, gas and water works rose from about 1/3 of
the total in 1948 to about 1 /2 of the total in 1951 and
then declined steadily to about 1/3 of the total again
by 1961. (2) Gross fixed capital formation in manufac
turing remained equal to about 1/5 of the total until
1952 and then declined to 1/10 of the total by 1961.
(3) Gross fixed capital formation in dwellings began
from something over 1/4 of the total in 1948, reached
almost 1 β of the total in 1955 and then declined again
to something over 1/4 in 1961. (4) Gross fixed capital
formation in transport and communications began
from something less than 1/3 of the total in 1948,
declined to 1/10 of the total in 1952, and then rose
again to something over 1/4 of the total by 1961.
The time pattern of investment in manufacturing
is by all odds the most disquieting of the four time pat-
61
TABLE 3 . 1 . Some Structural Comparisons : Composition
Year 19 5 2 19
Observed Standard Observed

Sectors structure structure structure
(1) (2) •../ (3)
Primary Production 33.8 36.8 30.2

Manufacturing 16.3 V 15.3 :6)'
Electricity, Gas & Water works 1.2 2.0 2.0
Construction 3.0 4.7 5.6
Transport & Communications . 8.8 5.8 8.0
Services 36.9 35.4 34.4
Total 100.0 100.0 100.0
Remarks concerning computations :

Basic data for the computations were taken from National Income Ac
counts of Greece, Nos. 9, 10. See also tables A — 1 . 1 , A—1.2
Cols. (2), (4), (7). : Estimates based on Chenery's regression coefficients,
for per capita income and population equal to those observed or projected
for Greece in the years concerned. See H. B. Chenery, op. cit.
Tables A - 2 . 1 , A - 2 . 2 .
Col. (8 ) : Estimates based on Chenery's regression coefficients, for per cap
ita income equal to that accruing from 1960 figure increased by annual rate
of 7%. See tables A - 2.1, A - 2.3.
Cols. (2), (4), (7), (8).: On the basis of Chenery's coefficients for the in
comes and populations concerned we estimated per capita values in % for the
following sectors of G. D. Ρ . : Primary production, Manufacturing, Construc
tion, Transport and Communications, and Services. In the case of Electricity
62
of Gross Domestic Product at Factor Cost 1952, 1960, 1972.
6 0 1 9 7 2
« Low » « High »
Standard Direct Indirect standard standard
structure projection projection projection projection
(4) (5) (6) (?) (8)
30.2 24.0„ 23.1 21.0 19.0

19.1 24.0.<. ; - 18.1 25.0 27.0
2.0 4.0 3.0 3.0 3.0
5.1 13.0 13.7 5.0 5.0
6.6 6.0 8.8 8.0 8.0
37.0 29.0 33.3 38.0 38.0
100.0 100.0 100.0 100.0 100.0
Gas & Water works for which Chenery does not give any coefficients, we as-
sumed that in the years 1952 and 1960 their relative share of GDP was equal
to 2% and that, for the purposes at hand, it could be set equal to 3 %
of G . D . P . for 1972.
Considering that the sum of the values of the five sectors is equal to 98%
and 97% of G . D . P . for 1952 and 1960 respectively, the value of total G.D.P.
was computed and the value of each of the six sectors was subsequently ex-
pressed as a percentage of total G . D . P .
Col. (5): Projection based on the average annual rate of sectorial growth
between the years 1952 — 1960. See tables A - 2.3, A - 3 . 1 .
Col. (6).: See tables A - 3 . 7 , A - 3 . 8 .
Transport and Communications in columns (1),(3), (5), (6) includes all
income from water transportation
63
•
terns. It is reasonably clear that the absorptive capac-
ity of the sector has not increased over the decade.
It would seem, therefore, that any growth plan for
the next decade should focus on this sector and on
those aspects of the Greek situation which account
for its sluggishness.
Table A-1.5 provides additional grounds for concern.
Public gross capital formation was 52% of the total
in 1948, declined to 20% in 1954 and rose again to
37% in 1961. This decline in the share of gross capital
formation of the private sector from 1954 to 1961,
when considered side by side with the falling ratio
of gross fixed capital formation in manufacturing to
the total, justifies some anxiety for the future.
64
Ill
Some Alternative Investment Programs
The structural targets in the alternative programs

prepared in this report are dominated by two considera-
tions. First, that the time pattern of investment in
manufacturing in the 1950's is highly unsatisfactory.
Second, that for a country relatively poor in natural
T A B L E 3.2. Incremental Capital - Output

Ratios Employed in Projections*
1. Primary Production 3.5

2. Manufacturing 2.0
3. Electricity, Gas & Water works 8.0
4. Transport & Communications 9.0
5. Dwellings 11.0
6. Other Services 2.0
* In fact, the ratios depicted above are incremental Gross

Fixed Capital Formation to net value added ratios. Tables A -
4.1 through A - 4.6 give the quantitative evidence considered
sector by sector. It should be stressed that the sectorial capital-
output ratios used for our projections are not statistical esti-
mates. Qualitative information (including expert opinion)
was used side by side with quantitative information drawn
from the experience of the fifties. See also the footnote on p. 75.
Source: National Accounts of Greece, Nos. 9, 10. For the
years 1958-1960 revised estimates of the National Accounts
are available. These ratios were computed and used for the
projections prior to the publication of the revised estimates.
However, the revised estimates do not materially affect these
ratios, and it was judged unnecessary to recompute them. ;
65
5
TABLE 3.3.1. Alternative Structural Targets
for Twelve Programs *
Target Target Target
Sector 24/26 23/27 22/28
Primary Production 24 23 22
Manufacturing 26 27 28
Construction 6 6 6
Electricity, Gas & Water works 3 3 3
Transport & Communications .., 8 8 8
Dwellings 6 6 6
Other Services 27 27 27
Total 100 100 100
* Shares of Gross Domestic Product at factor cost.
resource endowment, such as Greece,** manufacturing

should receive special emphasis — in the sense t h a t
its actual rate of growth ought to become higher than
its «standard» rate implied by, say, Chenery's interna-
tional coefficients.
Table 3.3.1 incorporates three alternative structural
targets for 1972. It will be noted t h a t the three alterna-
tive values assigned to the share of manufacturing
are 26%, 27%, and 28%. The lowest of the three, name-
ly 26%, is already higher than either of the two
projected values (columns 5, 6 of table 3.1), and it
is higher also than the value implied by the standard
pattern associated with a rate of growth of per capita
income equal to that experienced in Greece over the
last decade (column 7 of table 3.1). Attainment of this
target will undoubtedly call for substantial effort and
** A similar proposition could be made, say, for Italy and

Japan.
66
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planning. The intermediate value of 27% is harder
to achieve but ought to be given serious conside-
ration in view of the association of Greece with
the European Common Market. The high value of
28% may well be unattainable. The feasibility of these
alternative targets is primarily a matter of availabi-
lity of managerial and technical skills, of a high
standard of general education, and of an appropriate
attitude toward change and risk-taking. It is also a
matter of enlightened public policy and adequate plan-
ning and administrative machinery.
It will be noted that the corresponding targets for
the share of argiculture are 24%, 23%, and 22% respec-
tively. All three are higher than the share implicit in
the relevant standard pattern. Thus all three structural
targets for 1972 imply a more rapid growth for the share
of manufacturing and a less rapid rate of decline for
the share of agriculture than is implicit in the stand-
ard pattern. Incidentally, the proposed alternative
growth patterns for Greece are similar to the pattern
exhibited by the Italian economy, which, except
for size and a head-start of between 10 and 15 years,
is quite similar to the Greek economy.
The targets for the shares of the other major sectors
have been set at values which seem reasonable both
in terms of the projected shares (columns 5, 6 of table
3.1) — except for construction — and in terms of the
standard pattern (column 7 of table 3.1) —except
for services.*
The major criticism which can be levelled at our pro-
*An alternative target structure for 1972 involving the ma-

jor sectors (other than the manufacturing and primary sectors)
might have taken the following form : Construction 5°/0, Elec-
tricity, Gas & Water works 2%, Transport and Gommunica-
69
cedure of structural target setting is this: There is
no guarantee t h a t the structural targets make for a
«balanced» open economy. In other words, each of
the three target structures may hide significant imbal-
ances. In the absence of information on technical
coefficients and on demand elasticities, it is not pos-
sible to offer assurance t h a t the target structures are
free from imbalances. However, at the level of aggre-
gation involved, the critical «balance» tests relate to
the flow of domestic savings, external financing, the
structure of the balance of payments, and labor sup-
ply. These tests have been performed and are detailed
in subsequent sections of this report.
Four alternative growth targets have been selected.
They are expressed in terms of the ratio of gross fix-
ed capital formation to gross domestic product at
factor cost*. They are 2 1 % , 22%, 2 3 % , and 2 3 . 5 -
2 5 % . All are higher than the observed ratios prior
to 1960. (See table A-1.6). One, namely 2 1 % , is lower
than the observed ratios for 1960, 1961. One, namely
22%, is equal to the observed ratio in 1960, while
another one, namely 2 3 % , is equal to the observed
tions 7%, Services (including income from dwellings) 36%.

The advantage of this structure lies in the fact that it does
not understate services as much as the selected target struc-
ture. Given our limited computational facilities, and our desire
not to proliferate the alternatives under consideration, we
restricted our work to one selected target structure for the
major sectors — apart from the manufacturing and primary
sectors which were assigned three alternative values
* This particular ratio was chosen as a result of our con-
cern with sectorial structure which is available on a factor cost
basis.
70
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ratio in 1961. Finally the (graduated) ratio 2 3 . 5 -
2 5 % is higher than any observed ratio.
Combining the three alternative structural targets
with the four alternative ratios, we obtain twelve
«programs». The complete results of the computations
are detailed in tables A-5.1 through A-5.12. The meth-
od of computation is described in the mathematical
appendix. Table 3.2 and tables A-4.1 through A-4.6
record the incremental capital-output ratios (actual-
ly, the incremental gross fixed capital formation to
net value added ratios) which were employed in the
computations, and describe also the method by which
they were derived. Finally, summary information is
provided in tables 3.3.2 through 3.3.5.*
These tables are largely self-explanatory. A few com-
ments on the results are in order, however.
(1) The twelve programs provide a range of alterna-
tive per capita gross domestic product at factor cost
from $ 510 to $ 550 (at constant 1954 prices).
(2) With 1961 as a base year and over the 12 pro-
grams:
(a) The annual rate of growth of gross domestic
product at factor cost varies from 5.8% to 6.5%, and
the annual rate of growth of fixed capital formation
varies from 4.2% to 7.2%.
(b) The annual rate of growth of net value added
in manufacturing varies from 8.6% to 10.2%, while
* The reader should be warned that in the case of transport

and communications the base years (1961, 1963) do not in-
clude income associated with water transport, while the 1972
target should be interpreted as including it. As a consequence
the rates of growth of net value added by this sector are
slightly exaggerated. Also slightly exaggerated are the esti-
mates of gross capital formation in the sector.
72
1H CO ν* Ο r^ 00
r^ co •J« Γ^ I H ο
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«
Ο CO
cö ce CM co CM co CM
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Φ ο VO IO ιΗ co VO
M Ο CO co r>.
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the annual rate of growth of net value added in the
primary sector varies from 2.2% to 3.6%.
(c) The annual rate of growth of gross fixed capital
formation in manufacturing varies from 14% to 18%,
while the annual rate of growth of gross fixed capital
formation in the primary sector varies from—8.1% to
4.4%.
(3) With 1963 as a base year (the first year of the
programmed period) and over the 12 programs :
(a) The annual rate of growth of gross domestic
product at factor cost varies from 5.9% to 6.8% and
the annual rate of growth of gross fixed capital forma-
tion varies from 5.9% to 7.6%.
(b) The annual rate of growth of net value added
in manufacturing varies from 9.4% to 11.3%, while
the annual rate of growth of net value added in the
primary sector varies from 1.9% to 3.7%,.
(c) The annual rate of growth of gross fixed capital
formation in manufacturing varies from 8.3% to 10.3%,
while the annual rate of growth of gross fixed capital
formation in the primary sector varies from—5.2% to
3.1%.
(4) The annual rate of growth of gross fixed capital
formation (with 1961 as a base) for each of the twelve
programs falls (slightly) as we move from the «low»
to the «high» share of manufacturing. (This is due
to the relative magnitudes of the incremental capital-
output ratios in agriculture and manufacturing).
(5) For each of the twelve programs, the overall
incremental capital-output ratio falls (slightly) over
time. Thus it becomes clear that a link exists between
this rather empirical approach of target-setting and
an efficient program stated in terms of minimization
of the capital-output ratio subject to certain constraints.
74
Three additional, general comments are in order.
First, the assumption t h a t the sectorial capital-output
ratios will remain fixed at the chosen values throughout
the next decade is quite arbitrary. This, aside from
the fact t h a t in arriving at these ratios we relied more
on judgment and qualitative information than on
statistical estimation procedures. Alternative secto-
rial ratios were not considered in order to keep the argu-
ment as simple as possible. Needless to say, the struc-
ture of investment requirements would be significantly
affected by alternative assumptions on sectorial ratios
— while the aggregate investment requirements (which
depend on the weighted average of the sectorial ra-
tios) may not be expected to undergo drastic changes*.
Second, the method employed, though simple, is some-
what different from the customary one. The mathemati-
cal appendix, therefore, deserves some attention. Third,
more ambitious programs have also been considered, but
* It may be of interest to report that the annual average

capital-output ratio for the 10-year period 1952-1961 was
3.39 and that its standard error for a planning period of 10 years
was estimated at about 0.6. This gives some idea of the uncer-
tainty we may have concerning our projections of overall in-
vestment requirements. Actually, the period 1952 - 61 must
be judged as a most unusual period in respect to matters af-
fecting the capital-output ratio. There is good reason to believe
that the relevant standard error for the period 1963 - 72 will
be smaller than 0.6. It should be noted, furthermore, that while
gross fixed capital formation is given at market prices, net
value added is given at factor cost. In view of the systematic
relationship between factor cost and market price estimates
of Gross Domestic Product (it being kept in mind that indirect
taxes rise with rising GDP), the assumed constancy of the
incremental capital—output ratios (as chosen in this study)
hides a (small) fall in the «real» ratios.
75
are not reported upon in this study. It may be worthy
of mention t h a t if the ratio of gross fixed capital for-
mation to gross domestic product at factor cost were
set at 2 5 % throughout the decade, gross domestic
product would have exhibited an annual rate of growth
of 6.6% with 1961 as a base year or of 7 . 1 % with 1963
as a base year*.
* We can continue as follows: For S = 26%, TD will grow

at 6.8% per annum with 1961 as a base year or at 7.4% per
annum with 1963 as a base year. For S = 27%, the corresponding
growth rates are 7,0 °/o» 7.7%, and so forth.
76
IV
Feasibility of the Programs: Financing
Requirements
The first and fundamental test for each alternative

program is its feasibility in terms of the flow of do-
mestic saving and external financing. A special pur-
pose simple econometric model (called Investment Fi-
nancing Estimation Model — see table 3.4.1 and dia-
gram 1) was put together. Of the 12 equations 5
are definitional (eqs. 1.1, 2.1, 2.2, 2.3, 3.1). The re-
maining 7 equations were fitted separately by the meth-
od of least squares. Deflated data were used through-
out. Table 3.4.2 incorporates information on the pa-
rameter estimates obtained, the standard errors, the
coefficients of determination, the deflators employed,
and finally the selected origin in time for each data
series. Table 3.4.3 describes the model employed in pro-
jecting the external financing requirements* (as a re-
sidual) for each program. The results of these projec-
tions appear in tables A-6. and 3.4.5. A modified
version appears in table 3.4.4.
Some comments on the method used are in order.
It will be noted that we have not estimated Sp and
* Fs or external financing is defined as net capital flow

plus net borrowing from abroad.
77
Sg directly on the exogenous variables of the system
t=— ι
(namely on TD. 2 It )· Our approach (see table
t = —5
3.4.3) was dictated by the conviction that knowledge
of the structure is essential to policy making. The
estimates obtained through this substitution method
are unbiased if two conditions are satisfied. First,
that the system is algebraically recursive.* Diagram
1 establishes this property for our system. Second,
that the system is stochastically recursive. This re
quires that in every equation the disturbance be not
only uncorrelated with the exogenous variable or
variables, but that it be uncorrelated with all the
intermediate endogenous variables. If both assumpt
ions are satisfied then the estimates of the «indirect»
method employed are unbiased. The relative efficiency
of the two methods (direct as against indirect) would
appear to depend on the particular values of the pa
rameters . Admittedly the indirect method is less ro
bust than the direct method — in the sense that an
error of specification in the equation system would
lead to incorrect predictions. In our particular case
the results of the direct and indirect methods are very
close.
The fits are surprisingly good (see table 3.4.2).
In some instances this is due in part to the bias intro
duced by reason of the fact that unexplained varia
tions in the «explained» variable (consumption, cur
rent government expenditures) contribute to the de
termination of the «explanatory» variable (Y d , TD ). It
* (See H. Wold, Demand Analysis. New York, John Wiley

and Sons, 1953. pp. 50-51).
78
TABLE 3.4.1. Investment Financing Estimation Model
t = —ι
1.1 Sp = Yd — C 2.4 D = aD + bD · 2 2 * '
t = — 5
1.2 C = a c + b c Yd
2.5 y a = a y -f- by t
2.1 Yd = YN - W + TfP 2.6 T f P = aT + b T t
2.2 Y N = YD - D + ya 3.1 Sg = W + I T - G + ( T f g n )
2.3 W= DT+Eg—Tgp—ig 6.2 IT = aj + bi YD
2.3.1 W = a w + b w YD 3.3 G = a g + b g YD
Note :
( ) Indicates negligible vernment to hou
values which do seholds
not materially af 12) ig Interest on Public
fect our results debt
13) D Depreciation
1) Sp Private saving 14) I Gross fixed Asset
2) Yd Disposable income formation (exclud
3) G Consumption ing the value of
4) YN Net national in ships transferred to
come at factor cost the Greek flag)
5) W See equation 2.3 15) Sg Government saving
6) Tfp Transfers to pri- 16) IT Indirect taxes mi
vate sector from nus subsidies
abroad 17) G Current Govern
YD Gross domestic pro ment expenditures
duct at factor cost for goods and ser
ya Net income from vices
abroad 18) Tfgn Net current trans
9) DT Direct taxes fers to Government
10) Eg Receipts from Pub from abroad
lic enterprises 19) V Inventories
11) Tgp Transfers from Go 20) t Time
79
co co CM 05
m ta tit ta
σ> σ» σ>
«S S
φ to
Il II
•s I
§.2
11
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Diagram One
Causal Ordering of Variables in
Estimation Model.
II
02.3, [JT]„ [£}„ JT|2.4. g . ^ «g
81
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TABLE 3.4.4 Annual External Financing Requirements
For the Period 1963 -1966, by Program
Annual
External Financing Requirements
in million U.S. dollars
Programs (deflated)
1. 21-26 80
2. 21-27 70
3. 21-28 65
4. 22-26 105
5. 22-27 100
6. 22-28 95
7. 23-26 135
8. 23-27 130
9. 23-28 125
10. (23.5-251-26 165
11. 23.5-25-27 160
12. (23.5-25)-28 155
may also be due to the methods employed in the pre-

paration of the basic national accounts data.
It will be noted that the requirements computations
have been carried out through 1966 — that is to say,
they have been carried out only for the first 4 -
year period of the related programs. This is due to
our belief t h a t these estimates may not be relied upon
for long-term purposes. For the 4-year period in que-
stion, however, they provide a rough albeit reliable,
guide to the order of magnitudes involved. Table 3.4.5
and t h e supporting tables A—6.1 through A — 6.12
incorporate the results of our projections.*
Table 3.4.4. has been prepared on the assumption
* It stands to reason, of course, that these projections will

cease being good forecasting devices, if substantial structural
changes take place.
83
that the domestic saving projection of table A-6 may
be somewhat on the «high» side. It is likely, and in
any case desirable, to anticipate t h a t government ex-
penditures on education and health will be expanded
in the next four years, and t h a t a redistribution of
income in favor of t h e lower income groups will take
place. It makes sense, therefore, to take somewhat
lower estimates than those appearing in table 3.4.5. Thus
net domestic saving was set at 13.5% of gross domes-
tic product at factor cost, for the period 1963-66. The
aggregate external financing requirements for the 4-year
period were computed on this basis.
TABLE 3.4.5. Summary of Information of Tables A - 6 .

(For all programs for which the share of manufacturing in Gross
Domestic Product is equal to 27%.)
Year Sp * Sg* Total
% %
1963 10.1 3.2 13.3
1964 10.5 3.3 13.8
1965 10.9 3.4 14.3
1966 11.3 3.5 14.8
* Percent of Gross Domestic Product.
Although somewhat on the conservative side (as

compared with the estimates of table 3.4.5), these es-
timates bring out the fact that Greece has exhibited
in recent years a rather high capacity for domestic
saving.**
** Some structural changes in respect to government saving

(through government revenues) may be expected as a result of
the association of Greece with the European Common market.
For the 4-year period in question, however, the impact of
the association agreement on the fiscal structure of the coun-
try will not be very significant.
84
An annual rate of growth of gross domestic product
with 1963 as a base (roughly) equal to that experien-
ced in the past decade corresponds to a ratio of fixed
capital formation to gross domestic product at factor
cost of 23% — namely the observed ratio for 1961.
Taking it as the minimum acceptable ratio, we arrive
at the conclusion that the minimum annual external
financing requirement is around $ 130 million.
To be specific: for the period 1963-66 and for the
program 23-27 (s=23% and share of manufacturing
= 27%), the external financing requirement is $ 520
million or 4% of gross domestic product at factor cost
over the period. This is well within international ex-
perience (see U. N. World Economic Survey, 1960,
p. 65). Even as ambitious a program as the (23.5 - 25)-
27 (s = 23.5 - 25 over the period 1963 - 1970 and
share of manufacturing = 2 7 % ) is reasonable, for
the associated total requirement of external financing
is $ 640 million or 5% of gross domestic product at
factor cost, over the period 1963-66.
Thus, in principle, all twelve programs pass the fi-
nancing requirements test, and Greece ought to be
able to experience an annual rate of growth of its
gross domestic product of between 6.5% and 6.8%,
with 1963 as a base, or of between 6.2% and 6.5%
with 1961 as a base. This would require an annual
gross capita] formation rate of between 6.4% and
7.6%, with 1963 as a base, or of between 5.8% to
7.2% with 1961 as a base (depending in this case also
on the share of manufacturing in gross domestic prod-
uct at factor cost. See table 3.3.4). It should be no-
ted, however, that external financing in the case of
Greece has averaged at 3.6% of its gross domestic
product at factor cost over the period 1953-60. (See
85
table A-1.3). It seems, therefore, that continuation
of this pattern into the future would enable the coun-
try to experience at most a 6.5% rate of growth of
its domestic product (with 1963 as base year). As
was noted above, this corresponds (roughly) to a
ratio of gross fixed capital formation to gross domes-
tic product at factor cost of 2 3 % . Thus it is reaso-
nable to conclude t h a t the minimum acceptable pro-
gram (based on s = 23%) may also be the maximum
feasible program — if our expectations are not on the
optimistic side so far as external financing is concerned.
With 1961 as a base year, this implies an annual rate
of growth of gross fixed capital formation of between
5.8% and 6.0% (depending on the target share of
manufacturing), and of gross domestic product at fa-
ctor cost of 6.2%.
Whether or not, in fact, external financing of be-
tween $ 520 million and $ 640 million over the period
1963-66 will be available will depend both on the
seriousness with which the development program is
undertaken in Greece and on the attitude of foreign
governments, international agencies, and private firms
toward Greece, and on their appraisal of the prospects
of its economy*. It is evident, of course, t h a t a defi-
ciency of external financing need not be a decisive
obstacle to attaining desired growth rates, so far as
* The reader should be warned once again that the dollar

requirements discussed in this section have been computed
from drachmas at constant 1954 prices. To obtain the «expec-
ted» current values for the period 1963-66 special assumptions
are required - and each research worker is entitled to his own.
Our tentative estimate is that dollar requirements (over the
relevant period) at current prices may be between 118% to
125% of such requirements at constant prices.
86
financing requirements are concerned. Domestic saving
is a variable which may be manipulated (within b>
mits)by appropriate policies. A deficiency of external
financing, however, may become an obstacle to growth
via the balance of payments.
87
ν
Feasibility of the Programs:
The Balance of Payments
Tables A-7.1, A-7.2 and 3.5.1 through 3.5.4 incorpor

ated our results on the balance of payments feasibili
ty test. Regressions of the value of imports (goods
only) were computed on gross domestic product at
factor cost over the period 1954-1961 for the following
categories: Agricultural imports and industrial imports
in three sub-categories — consumer goods, interme
diate goods, and investment goods. A net invisibles
regression on time was also computed. Deflated series
were used throughout. Table 3.5.1 contains the rele
vant information concerning the basic work. The fits
are surprisingly good, despite the limited number of
observations.
The projections for 1963 - 66 appear in table 3.5.2.
The imports column (M) includes imports of services-
taken at 10% of imports of goods. The last column
of table 3.5.2 is of special interest. It records the ex
port and/or import substitution requirements for each
of four programs, namely the 21-27, 22-27, 23-27,
and the (23.5-25 )-27. The X, / Ms column values were
derived from the following expression : M — I s — F s =
Xr / Ms . For M and I s (where I s stands for net invisi
bles) projected values were used. For F s (net capital
flow plus net borrowing from abroad) we used the
88
eis
I O CO *r< C-^
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Ζ
TABLE 3 . 5 . 3 . Projected Imports and Export (and/or Import
Substitution) Requirements
as percent of G. D. Ρ . at factor cost
M : YD Xr / M*; · I D
Nn Programs
1963 - 66 1966 1963- 66 1966
/o /o /o /o
1 21 -27 26.60 27.38 12.98 13.54

2 22 -27 26.62 27.44 12.09 12.79
3 23 -27 26.67 27.46 11.24 11.99
4 (23.5-25)-27 26.69 27.48 10.32 10.92
S o u r c e : Table 3.5.2.
TABLE 3.5.4 Imports and Exports as percent of G . D . P .

at factor cost (Current Prices)
Tears M* : Y 0 X : T„
1954 19.36 10.03

1955 19.71 11.22
1956 20.26 9.94
1957 21.73 10.69
1958 21.81 10.35
1959 19.05 9.09
1960 19.39 8.36
1961 19.82 8.51
* Value of imports of goods and services, excluding transfer

of ships to Greek flag.
S o u r c e : National Accounts of Greece, No. 9. For the years
1958 - 1961 revised estimates of the National Accounts have
been used.
90
program requirements of external financing as they
were computed in the investment financing feasibi-
lity test.
Thus, for program 23-27 ( s = 2 3 % and share of
manufacturing= 27%) the average annual export
and/or import substitution requirements for 1963-
66 amount to around $ 350 million, while in 1966 they
reach $ 410 million. * For the period 1963 - 66, there-
fore, imports of goods and services, on the average,
are estimated at something less than 27%, while ex-
port and/or import substitution requirements are
estimated at something more than 1 1 % of gross do-
mestic product at factor cost. The (23.5-25 )-27 pro-
gram seems to be somewhat easier to achieve from
a balance of payments point of view. The average
annual export and /or import substitution requirements
for 1963 - 66 are around $ 325 million, reaching $ 375
million in 1966. For the 4 - year period, therefore,
imports of goods and services, on the average, are
estimated at something less than 27%, while export
and /or import requirements are estimated at something
over 1 0 % of gross domestic product at factor cost.
This is due to the fact t h a t external financing has been
set at $ 160 million for program (23.5-25)-27, whereas
it was set at $ 130 million for program 23-27. Thus,
if relatively pessimistic expectations concering external
* It should be kept in mind that the value data arrived at

in these computations are deflated data. It should also be
kept in mind that these projections do not take account of
the structural changes implied by Greeee's association with
the Common Market countries. Since the projections, however,
do not extend beyond 1966, this is not a serious source of
concern.
91
financing prevail, program (23.5-25 )-27 may not be
feasible.
Tables 3.5.3 and 3.5.4 make possible a comparison
of the historic pattern to program Xr / Ms requirements.
Three observations emerge from this comparison:
(1 ) It is feasible, though not effortless — in view of
the weak export performance of the Greek economy
in the recent past — to meet the export and/or import
substitution requirements for program 23-27. (2 ) A trade
gap of 16% of gross domestic product at factor cost
is rather alarming. The flow of invisibles and external
financing should not be relied upon to close this gap
indefinitely (3) There exists indeed a balance of pay-
ments problem for the Greek economy. Fundamental-
ly, however, it is a structural problem which must
be met at the source rather than with ad hoc emergency
measures. The proposed increased emphasis on manu-
facturing along with efforts to develop a new product-
mix, to reduce the inefficiency of the resource allo-
cation mechanism, raise educational standards, and
develop a class of managers will go a long way toward
solving the balance of payments problem.
It is interesting to note that, so far as the balance
of payments test is concerned, all programs are feasi-
ble in principle, although all require effort and design.
In part, this is the result of our computational method,
according to which external financing requirements
are determined for each program as the difference
between programmed investment and domestic saving.
In part, however, it is the result of the highly favor-
able pattern of invisible receipts which, for Greece,
has been the Deus ex machina.
92
VI
Feasibility of the Programs: Labor
Requirements and Labor Supply *
Tables 3.6.1, 3.6.2, and A-8.1 through A-8.4 incorpo-

rate our estimates and results. The labor requirements-
supply test was carried out only for two programs,
namely for the 23-27 and for the (23.5 - 25)-27, and
only for the terminal year 1972. Three alternative
estimates of labor supply have been obtained, by al-
lowing the emigration rate to vary from 0.3% (which
is probably too low) to 0.6% (which is probably on
the high side). Three alternative labor requirements
were obtained, by allowing sectorial net value added
per employed person to vary from something below
to something above what it would have been, had the
experience of the decade 1951 - 61 been continued
through 1972.
Inspection of table 3.6.2 reveals that a state of near-
full to over full employment (allowing for frictional un-
employment of 3 °/0) will be reached if labor produ-
ctivity maintains the pace of the decade 1951 -1961
and that population growth does not fall below 0 . 9 %
per annum. Under these assumptions program 23 - 27
amply allows for frictional unemployment, while pro-
gram (23.5-25)-27 would allow for less than 3 %
unemployment.
* The term «labor supply» should be taken to mean «la-

bor available».
93
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A labor, surplus exceeding the 3 % margin allowed
for frictional unemployment, would emerge in 1972
only on the assumptions that the net value added
per worker would grow more rapidly than it did du-
ring 1951 - 1961 and that the rate of growth of po-
pulation would not fall below 0.7% per annum. Thus,
depending on the program selected, labor surplus,
after due allowance for frictional unemployment,
would range from 240,000 to 50,000. However, if the
emigration rate were to continue at the levels of
1961, 1962, surplus labor would disappear by 1972
even on the assumption of higher labor productivi-
ty than was experienced in the decade 1951 - 61.
Finally, a definite labor shortage will emerge by
1972, if the rate of growth of net value added per
worker falls slightly below the 1951-61 rate. It is
also apparent that a shortage of male labor will
emerge by 1972 under practically any of the consi-
dered assumptions regarding productivity, population
growth and program adoption. This shortage will
upset the ratio of female to male in the labor force
of 50 to 100 which held for 1961 and was extrapo-
lated to 1972.
These conclusions are rather surprising. To repeat:
surplus labor will continue to persist by 1972 only on
the assumption that the net value added per employed
person will grow over the next decade at a faster rate
than it did in the last decade and that the annual em-
igration rate will be lower than it was for 1960, 1961.
If labor productivity maintains its past pace, Greece will
face by 1972 a rather «tight» labor market, while if
productivity drops below its past record, labor short-
ages may be expected to develop.
The policy implications of this state of affairs are
96
also rather striking. Granting that policy makers
must engage in an all out effort to enhance the effic-
iency of the Greek economy, to maintain a high rate
of growth, and to achieve substantial structural chan-
ges within the next decade, they ought to make eve-
ry conceivable effort to discourage emigration. Clearly
the best way to discourage it, is to raise as rapidly as
is possible the rate of employment — which (given
the need to make efficient resource allocation deci-
sions) means that they ought to move as rapidly as
is possible to the highest feasible growth path. Accor-
dingly, a program such as our (23.5-25 )-27 or even a
more ambitious program, involving say the first four
to five years of the next decade, ought to be given im-
mediate consideration. As we have seen, however, the
main immediate obstacle to such a program — at the
macro-level — is external financing. Given the histo-
ric pattern of external financing, external financing
requirements for even our (23.5-25 )-27 may be rather
difficult to satisfy.
Naturally, the emigration problem may be attacked
in other ways. Efforts to repatriate the emigrants ought
to be undertaken pari passu with the development
of new job opportunities. Relatively short-lived la-
bor absorbing projects (public works, road-building,
etc.) and worker training programs ought to be pro-
moted. However, in view of the projected labor mar-
ket situation in 1972, it makes no sense to place a
premium on labor-intensity in the overall allocation
of investment.
Two warnings are in order: First, the data employed
in the labor market test leave much to be desired.
They are based on estimates of the number of persons
employed on the dates of the two censuses (1951,
97
7
TABLE 3.6.2. Total and Male
1. Estimates for the programs 23-27, (23.5-25)-27 and for productivity rates;
a) Lower than those observed during 1951 - 61 by 0.5,
b) Equal to those observed during 1951 - 61,
c) Higher than those observed during 1951 - 61 by 0.5.
Total
(Males )
(i) A n n u a l r a t e of population
g r o w t h 0.9%
Labor S u p p l y Total 3,780
(Males) (2,520)
Excess of Labor Supply over Labor Re-
quirements Total
(Males )
(ii) A n n u a l r a t e of population
g r o w t h 0.7%
L a b o r S u p p l y Total 3,680
(Males) (2,450)
quirements Total
(Males)
iii) A n n u a l r a t e of population
g r o w t h 0.5%
L a b o r S u p p l y Total 3,600
(Males) (2,400)
quirements Total
(Males)
Note : Labor supply for males is taken equal to 88% of working - age ma
labor supply. See Table A - 8.4.
No allowance have been made in this table for frictional unemployment
Labor Requirements for 1972
Excess of Labor Supply over Labor Requirements in each of the above
cases and for three different estimates of working - age population cor-
responding to population rates of growth equal to 0.9%, 0.7%, 0 . 5 %
respectively.
Persons in thousands
Labor Requirements
Program 23-27 Program ( 23.5 - 25 )-27
a b c a b c
3,810 3,620 3,430 3,920 3,720 3,520
(2,560) (2,430) (2,300) (2,630) (2,500) (2,370)
30 160 350 —140 60 260

40) (90) (220) (—110) (20) (150)
—130 60 250 —240 —40 160

(-110) (20) (150) (-180) (-50) (80)
-210 —20 170 —320 —120 80

(-160) (-30) (100) (^230) (-100) (30)
population. Labor supply for females is taken equal to 50% of the male
99
1961). Estimates of days worked over the two years
involved in the test are not available. On the whole
there is reason to believe that, were the test based
on man-days worked rather than on persons employed,
a much less tight national labor market would have been
projected for 1972. Thus the elasticity of labor supply
might be substantially higher than is suggested by our
numerical results, which therefore must be taken with a
grain of salt. Second, the demand-supply relationship has
been considered here in the most aggregative terms.
A projection of the distribution of available skills as
compared to skills required, program by program, has
not been attempted. In this respect there is good rea-
son to believe that significant bottlenecks may develop
long before an overall shortage comes into evidence.
100
VII
Conclusions
In the preceding chapter a number of programs,

ranging from easy to rather difficult, were considered
and tested in terms of their feasibility at the macro-
level.
In principle even the most ambitious program con-
sidered (giving an annual rate of growth of G D P at
factor cost of 6.8% - with 1963 as the base year) is
feasible. The main immediade limitation, the main obs-
tacle at the macro-level, seems to be external financing.
On a five-year basis (which is the customary planning
period) it requires $ 800 million*. It is true, of course,
t h a t a deficiency in the flow of external financing can
be compensated by increased domestic saving. In view
of the economy's recent record, it is fair to conclude
that, if necessary, the flow of domestic saving may be
increased somewhat beyond the projected levels through
appropriate fiscal and monetary policies. However, a
decline in the flow of external financing below the
* External financing requirements at «expected» current prices

of around $ 950 million correspond to the S 800 million figure
appearing in the text. See footnote page 86.
Labor supply may become an obstacle for the more ambi-
tious programs toward the end of the 60 's. This is no justi-
fication, however, for not starting out with as high a rate of
growth as is feasible. Indeed, as was pointed out earlier,
there is much justification for doing exactly that.
101
projected levels would undoubtedly lead to balance of
payments difficulties, at least in the shortrun. Given
the strictures imposed by Greece's association with the
European Common Market, import restrictions cannot
be resorted to on a scale which would provide the so-
lution. Therefore, a deficiency in the flow of external
financing would impose upon Greece additional export
requirements — which, in view of Greece's recent re-
cord in this sector, might be difficult to meet.
Looking ahead, the major underlying weakness of
the Greek economy derives from the sluggishness of
its exports. Notwithstanding the fact that the flow
of invisibles «may save the day», Greece ought to
make a major effort to improve its export position.
Thus the specific investment criteria to be employed
in the selection of concrete projects ought to include
along, say, with a measure of the contribution to the
value of the social product at the margin, some mea-
sure of the balance of payments (export or import
substitution) contribution of the projects under con-
sideration. Needless to say, the incorporation of bal-
ance of payments considerations in the investment
criterion will not provide, by itself, the solution
to the problem. The widening trade gap is a symp-
tom of resource misallocation, a symptom which
is intimately related to the sluggishness of private
investment in manufacturing. The structural targets
incorporated in the various alternative programs
surveyed in this report take account of the need to
reallocate investment on a fairly grand scale. Natu-
rally, from a micro-economic point of view, the task
ahead is enormous. Resources, especially human re-
sources, must be developed at a rapid pace and the
economy must undergo radical reorganization. A rough
102
outline of guideposts for the policy maker ought to
include the following considerations.
(1) Entrepreneurial activity must be made avai-
lable to the economy on a fairly large scale. This is
partly a matter of developing domestic managerial
resources andjof attracting foreign managerial talent
on an interim basis. It is also a matter, however, of
drawing carefully the line'between activities for which
the major responsibilityjfalls on the shoulders of pri-
vate entrepreneurs, and activities which must be
undertaken by public or semi-public agencies. There
is a wide range of decisions relating to the development
of the economy, which cannot be entrusted to or,
indeed, forced upon the individual entrepreneur. Such
activities include all kinds of promotional effort inten-
ded to implement the targets of the program, and
require a" trained and dedicated body of civil servants.
Thus,' in a very real sense, the ultimate responsibility
lies squarely on the political leadership of the country.
(2) There is pressing need for streamlining the pre-
sently cumbersome «system» of government regula-
tion of economic activity. In some sense there is «too
much» government on the Greek economic scene, while
there is too little research and too little planning, and
the organizational apparatus for the execution of the
various plans is practically absent. The mosaic of
fiscal, credit and market regulations which are sub-
ject to abrupt changes without notice can hardly be
expected to encourage private investment activity
of the right kind.
(3) Where the market mechanism, the competitive
process, is allowed to perform the resource - alloca-
tion task, it ought to be allowed to work. The rewards
for success should be high — but so should be the
103
penalties for failure. The barriers to entry — which
in Greece reach unusual heights — ought to be lower
if not removed. «Saturated» lines of endeavor and
«closed» professions ought to be exposed to the rigors
of the competitive process.
(4) The allocation of credit by sectors of economic
activity ought to reflect the targets of the program —
while the allocation within each sector ought to re-
flect the contribution of each project to growth and
to the balance of payments. It is essential that the
sector - oriented credit and promotional institutions
of the country come to recognize the need for the use
of socially - beneficent criteria in the allocation of
funds and the promotion of investment. Some specia-
lization of monetary and fiscal instruments to deal
with «pockets» of excess capacity and unemployment
may also be desirable.
(5) Certain preconceptions which are widely pre-
valent must yield ground to up-to-date scientific
standards. Promotional investment activity of public
and semi-public agencies and of the leading credit
institutions of the land must become sensitive to the
need for feasibility studies which will provide the
necessary backdrop to investment allocation decisions.
The overwhelming emphasis which is presently given
to large and spectacular but narrow-scope projects
must give way to a systematic exploration of the deve-
lopmental possibilities of small industry (including
agriculture - based small industry), and the appro-
priate role of public, semi-public or cooperative priva-
te agencies in providing to small firms those services
which typically are available only to large firms.
(6) The need to enhance the export capacity of the
economy could easily lead to erroneous decisions. It
104
is essential to come to understand that an efficient
export sector cannot be grafted upon an inefficient
economy. Greece's low capacity to export is a sympton
of structural weakness, of resource misallocation, of
missing links in the distribution chain — and should
be handled as such. Special measures, such as prefe-
rential credit or fiscal treatment for export-oriented
firms, while of doubtful effectiveness in the short-run,
are often distinctly harmful in the long-run.
(7) Some reduction of the inequality of regional
and personal income distribution, especially through
increased social consumption, must be undertaken at
the earliest possible date. If the populace is to parti-
cipate actively in the development effort, it must share
in its fruits. Distributive measures, where possible,
must be undertaken directly rather than indirectly
through measures which distort the pattern of resource
allocation.
(8) Unemployment, open and disguised, is a serious
problem for Greece today. If a high rate of growth is
maintained throughout the next decade, to all intents
and purposes this problem will disappear. In the
meantime, every effort should be made to reduce unem-
ployment through special-purpose, short - lived, la-
bor - absorbing projects, and thus discourage emigra-
tion which may well become a decisive obstacle to
the growth of the Greek economy in the not too distant
future.
(9) Improvement in the level and structure of edu-
cation is of the utmost importance. Without early,
courageous measures intended to raise the techni-
cal know-how and the general level of scientific sophi-
stication of the country, any ambitious growth pro-
gram is doomed to failure.
105
These tasks are very demanding. Unless they
are undertaken immediately and in all seriousness,
Greece — having associated itself with the European
Common Market — may well remain or become a
peripheral, agricultural economy and a tourist resort,
incapable of sharing in the growth rate of its associates.
But one can be optimistic, knowing Greece. The
tasks, though demanding, can be achieved. The
country has faced great challenges before and met
them courageously each time. With the proper spirit,
with efford and intelligence, and perhaps some ini-
tial sacrifice, the Greek people will reach these goals,
and Greece will take an active role in the European
Community of Nations.
106
APPENDIX
M A T H E M A T I C A L A P P E N D I X
For each sector Ij<t> = k, Δ TD-
or ÏD = 1 2 J
i(t+2) = T7 h0 +%+1) i · '
In this equation the lag is equal to 1.
ÏOj(t+2) a n d Ij(t) are unknowns, while kj is a constant,
and ï D j / t + 1 ) is known. Thus we have 2J unknowns and J
equations.
For each sector
Τ Β
*+»- = rj(t+2, i - i , a J.
T
°(t+2)
Thus we add J equations and one unknown, namely
T
°(t+2) ·
(The Tj 's are pegged).
Finally,
ι
X Ij(t) = 8T 0 ( t )
i=i
where S is the pegged ratio of Gross Fixed Capital For
mation to Gross Domestic Product at factor cost.
Thus, we end up with 2J + 1 equations in 2 J + 1 un
knowns. The system is given immediately below.
TD Ij l)
% + 2 ) = Tf ' + T°i<t+D i = 1
· 2 J
Y[> = rj
J(t+2) (»+2) T l>(t+a)
J
Σ \t) = ST°(t)
j = 1
subject to Ij =g 0 for all j .
109
substituting, we arrive at the system
ί Ypi
τÌ D _ _ ( t + i) J; __ ι οA Τ
(t+2) r. k. r- ' " " J
Jit + 2) J J(t + 2)
J
2, i j(t) = sxD(t)
J— ι
with J + l unknowns in J + l equations.

Y
1 1(t+1)
Letting ^ = — and b = r°
r r
J{t+2) i J(t+2)
we write
T — a l b
D( t +2) j m = j J = 1. 2 J
% + % + · < • % - ST D ( t )
Solving for T D ( t ) and Ij/ t + 2 ) ' s straightforward
Since r-(t+2) is given, we may then solve for T D j ( t + 2 )
Actually, in the computation for the twelve alternative programs

a short-cut method was employed which only distorts (slightly )
the ratio of Gross Fixed Capital Formation to Gross Domestic
Product at factor cost.
The overall incremental capital-output ratio (actually, the in

cremental gross investment — net value added at factor cost
ratio) appearing in the relevant program tables is a weighted
average:
AT
u ^ ν °j(t)
k k ÄT
= Σ i D<t)
no
TABLES
TABLE A - 1 . 1 . Gross Composition of Domestic Product at factor cost,
Sectors 1948 1949 1950 1951 1952
1. Agriculture, etc 31.4 35.3 32.3 34.5 32.8

a) Agriculture 29.7 33.7 30.2 32.7 30.9
b) Forestry 1.1 0.9 1.3 1.2 1.3
c) Fishing 0.6 0.9 0.8 0.6 0.6
2. Mining and Quarrying etc 0.4 0.4 0.6 0.9 0.9
3. Manufacturing 14.6 15.7 16.9 16.7 16.3
a) Food, Beverages, Tobacco 3.7 4.0 3.9 3.9 3.7
b) Textiles 2.6 2.7 3.1 3.0 2.9
c) Clothing 2.9 3.1 3.1 3.0 3.1
d) Wood 1.2 1.2 1.3 1.3 1.2
e) Paper 0.4 0.4 0.6 0.6 0.5
f) Chemicals 1.6 1.7 1.9 2.0 2.0
g) Stone, Clay and Glass 0.6 0.5 0.6 0.6 0.7
h) Basic metal industries — 0.1 0.2 0.2 0.2
i) Metal manufacturing engineer
& electricity goods 1.3 1.5 1.6 1.5 1.3
j) Transport Equipment — — 0.1 0.2 0.2
k) Others 0.3 0.5 0.5 0.4 0.1
4. Electricity, Gas & Water works 0.9 0.9 1.0 1.1 1.2
5. Construction 2.9 2.9 3.8 2.9 3.8
6. Transportation & Communications .. 8.2 7.7 8.3 8.4 8.2
a) Water & Transportations . . . . 1.1 1.2 1.4 1.3 1.5
b) Other Transportations 6.0 5.4 5.7 5.9 6.4
c) Railroads 0.3 0.2 0.4 0.4 0.1
d) Communications 0.8 0.9 0.8 0.8 0.1
7. Wholesale & Retail Trade 11.7 12.1 13.2 12.2 12.8
8. Banking-Insurance & Real estate . . . 2.0 1.8 2.1 2.1 2.4
9. Ownership of Dwellings 5.4 4.6 4.8 4.7 5.4
10. Public Administration & Defence . . . 13.0 10.5 8.5 8.4 8.6
a) Administration 4.8 4.0 4.2 4.1 4.2
b) Defence 8.2 6.5 4.3 4.3 4.4
11. Health & Education services 4.2 3.5 3.7 3.5 3.8
a) Health services 2.2 1.8 1.9 1.7 1.9
b) Education services 2.0 1.7 1.8 1.8 1.9
12. Other Services 5.3 4.6 4.8 4.6 4.9
13. Gross Domestic Product 100.0 100.0 100.0 100.0 100.0

14. G. D . P . in Million D r a c h m a s . . 33640 40863 40738 44028 43691
Source: For 1948-1959 National Accounts of Greece, Number 9.

For 1960, National Accounts of Greece, Number 10.
For 1958*, I960*, 1961* Revised National Accounts.
112
1948 - 1961. Percentage Distribution by Sectors. At 1954 prices
1953 1954 1955 1956 1957 1958 1959 1960 1958* 1959* 1960* 1961*
36.2 34.4 34.8 33.3 35.4 31.9 32.0 28.8 31.9 31.9 28.7 30.5
34.5 32.5 33.0 31.5 33.5 30.0 30.0 27.0 29.9 30.1 26.9 28.7
1.2 1.3 1.2 1.2 1.2 1.2 1.2 1.0 1.2 1.1 1.1 1.1
0.5 0.6 0.6 0.6 0.7 0.7 0.8 0.8 0.7 0.7 0.7 0.7
0.9 1.0 1.1 1.3 1.3 1.3 1.3 1.4 1.3 1.3 1.4 1.3
16.6 18.1 18.2 18.4 18.0 19.2 18.9 19.7 19.1 18.7 19.6 19.0
4.0 4.2 4.2 4.6 4.2 4.3 4.1 4.1 4.3 4.1 3.9 3.6
2.8 2.9 2.8 2.7 2.8 2.9 2.5 2.7 2.9 2.5 2.7 2.6
3.0 3.0 2.9 2.8 2.8 3.0 2.7 2.8 3.0 2.7 2.8 2.7
1.2 1.4 1.4 1.4 1.4 1.5 1.5 1.4 1.5 1.4 1.4 1.3
0.6 0.7 0.7 0.8 0.8 0.9 1.0 1.1 0.9 1.0 1.1 1.1
1.8 2.0 2.1 2.0 2.0 2.1 2.5 2.7 2.1 2.5 2.7 2.6
0.8 0.9 1.0 1.0 1.0 1.1 1.0 1.1 1.1 1.0 1.0 1.0
0.2 0.3 0.3 0.3 0.3 0.3 0.4 0.4 0.3 0.4 0.4 0.5
1.4 1.8 1.9 1.9 1.8 2.1 2.1 2.3 2.0 2.1 2.3 2.4
0.4 0.4 0.4 0.4 0.4 0.5 0.6 0.6 0.5 0.6 0.6 0.7
0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
1.2 1.2 1.3 1.4 1.5 1.7 1.8 2.0 1.6 1.8 1.9 1.9
3.2 3.8 3.7 4.2 3.8 4.7 4.8 5.6 4.7 4.8 5.8 6.0
7.6 8.0 7.9 8.0 7.6 7.6 7.7 8.0 7.9 8.0 8.3 8.2
1.1 1.2 1.4 1.4 1.3 1.3 1.4 1.5 1.3 1.4 1.5 1.6
5.3 5.6 5.4 5.4 5.2 5.2 5.1 5.2 0.3 0.4 0.3 0.3
0.4 0.4 0.4 0.4 0.4 0.3 0.4 0.5 5.5 5.4 5.6 5.4
0.8 0.8 0.7 0.8 0.7 0.8 0.8 0.8 0.8 0.8 0.9 0.9
12.0 12.0 11.6 12.1 11.8 12.3 12.1 12.3 12.2 12.0 11.9 11.7
1.8 1.8 1.9 |2.0 1.7 1.9 1.9 2.2 2.0 2.0 2.3 2.3
5.1 5.1 5.4 5.6 5.8 6.1 6.2 6.7 6.1 6.3 6.8 6.7
7.6 6.8 6.5 6.2 5.8 5.8 5.7 5.7 5.8 5.7 5.7 5.2
3.6 3.5 3.4 3.3 3.0 3.0 2.9 2.9 3.0 2.9 2.9 2.7
3.9 3.3 3.1 2.3 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.5
3.4 3.3 3.1 3.1 3.0 3.1 3.1 3.1 3.0 3.1 3.1 2.9
1.7 1.6 1.5 1.6 1.5 1.6 1.6 1.6 1.6 1.6 1.6 1.5
1.7 1.7 1.6 1.5 1.5 1.4 1.5 1.5 1.4 1.5 1.5 1.4
4.4 4.5 4.4 4.4 4.3 4.4 4.5 4.5 4.4 4.4 4.5 4.3
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
49902 51611 55453 58470 63452 65100 67917 70470 65339 68422 70788 78434
113
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118
T A B L E A - 1 . 6 . Gross Fixed Capital Formation as per-
centage of (1) Gross Domestic Product at factor cost and (2)
Gross National Product at market prices.
At 1954 prices
Years (1) (2)
1948 13.4 11.8

1949 14.0 12.6
1950 20.7 18.7
1951 16.2 14.4
1952 14.3 12.6
1953 13.7 12.1
1954 14.9 13.1
1955 15.9 14.0
1956 17.4 15.0
1957 16.4 14.0
1958 19.9 17.1
1959 18.9 16.3
1960 22.3 19.0
1961 23.2 19.7
S o u r c e : National Accounts of Greece No. 9. F o r t h e years

1 9 5 8 - 1961 revised e s t i m a t e s of t h e National Ac-
counts h a v e been used.
TABLE A - 2 . : I. M i d - T e a r and E n d of t h e T e a r E s t i m a t e s
of P o p u l a t i o n : 1951 - 1961 fin t h o u s a n d s )
Tear Mid - year E n d of t h e year

Population Population
1951 7,646* 7,683

1952 7,719 7,756
1953 7,793 7,830
1954 7,868 7,906
1955 7,943 7,981
1956 8,019 8,057
1957 8,096 8,135
1958 8,174 8,213
1959. 8,252 8,292
1960 8,331 8,371
1961 8,412 8,452
N o t e : For each year of the period 1951 - 61 the rate of
population increase is taken equal to 0.96% which is the average
annual rate of increase between the years 1951 and 1961.
* Population figures estimated by the National Statistical
Service of Greece for the 30 of June of 1951, on the basis of the
results of the 1951 Census.
119
TABLE A - 2 . 2 . Net National Income, Gross Domestic
Product at factor cost 1952, 1960
rate of
increase
1952 1960 1952-1960
Net National Income in

mill, drs 41,829* 69,240 6.5
Net National Income per
capita in $ 181 277 5.5
Gross Domestic Product
in mUl. drs 43,691* 70,470* 6.2
per capita in $ 189 282 5.2
Revised figures
for 1960
mill, drs 41,829* 69,448** 6.5
$ per capita 181 278 5.5
in mill, drs 43,691* 70,788** 6.2
in $ per capita 189 283 5.2
Population in (000) 7.719 8.331 1.0
* S o u r c e : National Accounts of Greece, Nos. 9, 10.

** S o u r c e : Revised National Accounts of Greece.
120
TABLE A - 2 . 3 . Average Annual Rate of Growth of the Major
Sectors of the Greek Economy:1952 - 1960
Annual rate
of growth of per
S e c t o r s capita figures
/o
Agriculture 3.5
Mining & Quarrying 10.2
(Primary Production ) (3.7)
Manufacturing 7.7
Electricity, Gas & Water works 12.0
Construction 13.5
Transport & Communications 3.9
Dwellings 8.7
Other Services 3.4
(Total Services) (4.2)
The period 1952 -1960 was employed for projections for

the following reasons:
a) The years prior to 1952 were rather unusual (reconstruc-
tion, refugees' problem, etc.).
b) 1952 and 1960 are considered normal years weather-wise
for agriculture. Fluctuations in the agricultural sector have signi-
ficant repercussions on the Greek economy.
S o u r c e : National Accounts of Greece, Nos. 9, 10.
121
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TABLE A - 4 . 1 . Incremental Gross Fixed Capital
Formation/Net Value Added for Primary Production.
57
«ώ. IpCO
t=54
= 1.16
*Dn .._ — *Dn
58
Z. Ip(t)
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2.03
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59
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kp has been set equal to 3.50 on the assumption that observa

tions 1, 2 are too favorable, reflecting conditions which will
not be repeated in the future, and that observation 3 is hea
vily weighted by reclamation and irrigation works. (Earlier ob
servations have been disregarded as being entirely unrepresen
tative). In this and in the following tables we have taken
4 - year periods (since Greek series exhibit a 4 - year cycle),
and one-year lag.
133
TABLE A - 4.2. Incremental Gross Fixed Capital
Formation/Net Value Added for Manufacturing.
51
2* Im(t)
t = 4 8
1. T y . 2.19
1 A
Dm Om
<52> (48)
52
2* Im(t)
Δ. »y, γ "• — J* . J 1
m
(63) (4e)
53
2* Im(t)
t =
3. ü . r = 2.14
Dm Dm
<54. <60.
54
2* Im(t)
4. -ΤΗ rr = 1.64
™Î5B> (51>
55
1
Σ 5 2
Im(t)
5. v " v
1 l
D m D
134
56
2M Im(t)
6. ' =53 = 1.23
D m D m
(5.) (63.
57
2L Im(t)
7 t = 54
7. -=Η ^ = 1.42
i
Dm O m
(58) (54)
58
2d Imft)
t = 5 5
- = 2 . 0 5
m
(6») (65)
59
Im
Σ (o
9- r
* ~ ^ T
= 1-96
lDm Dm
<eo> <5e>
1 4,
km = 4 - Τ ki 9
= 1.83
i= l
km has been rounded off to 2.00. This ratio is confirmed by

other detailed investigations in the Center of Economic Research.
135
TABLE A - 4.3. Incremental Gross Fixed Capital For
mation/Net Value Added for Electricity, Gas & Water works.
57
Σ ît)
t = S 4
1. γ T
= 8.10
Ό. * De
<68> (64>
58
Ie
Σ (t>
5 5
2. •>, * " ^ = 7.78
1
*De — De
(59) (55)
59
Ie
Σ (t>
t = 56
3. ψ -,, = 7-67
•••ο- — J-D-
(βΟ> (δβ)
k e = - Ι - Y ki = 7.85
ά
i= i
k e has been rounded off to 8.00. Earlier observations have

been considered as being unrepresentative.
136
TABLE A - 4.4. Incremental Gross Fixed Capital For
mation/Net Value Added in Transport & Communications.
58
Σ ^(t)
t== 55
= 9.68
* Dc ^ Dc
C
(5»> (55)
59
Σ %>
2. ^ '~5β = 9.88
kc = 4 - Σ k ' = 9·78
kc has been rounded off to 9.00. Earlier observations have been

considered as being unrepresentative.
137
TABLE A - 4 . 5 . Incremental Gross Fixed Capital
Formation/Net Value Added in Dwellings.
51
Σ Hi
t = 48
1. Y v
= 14.72
Γ, lDd
"»«.Β ~ <483
52
Σ fyt)
t = 49
2. T
-, X
= 10.91
•••Dd Dd
(53) (4tu
53
Σ ^(t)
3. v
'~5° v
= H-71
lD Od
d«54> <50>
54
Σ Η)5 i
4. Y
'~ -,, = 10.45
1
Od J-Dd
(55) (51)
55
Σ ^(t)
t = 52
5. · τ τ
= 10.85
138
56
Σ tyt)
5 3
6. γ '~ -,, = 12.23
l D d 0<1
<57) ~~ (53»
57
Σ ΐ-ω
5 4
7. 4, ^ „ = 11.32
l D d _ l D d
<58. < 5 4 .
58
Σ ïdit)
t - 5 5
8. y. y. = 12.18
* Od — * Dd
α
(5β) °<66)
59
Σ Id(t>
t _ 5 6
ο = 11.31
M>d, ^Dd
(βΟ> (5«>
, 9
ι * V ι . .
kd ki = 11.31
= χ i =Σ
l
kd has been rounded off to 11.00.
139
TABLE A - 4.6. Incremental Gross Fixed Capital
Formation/Net Value Added in Services.
51
Σ =
i <t)
{ 4 8
1. v
~ -,, = 2.05
52
Σ ι·α»
2. γ -γ, d-ZO
1
los — Os
(53) *(4»)
53
I,(0
3. γ
t?50 γ ^ A.75
•*-D«
S
* De
S
(54) (50)
54
Is
Σ (t)
M
4. y *~ 4. = 2.58
1
Ds 'θ.
(55) (tl>
55
Σ **(fj
5. y, *~&* = 2.03
1
"««.«> ~ I D S < H ,
140
56
Is
Σ (t)
6. —-γ, -γ, = 2.2ο
•Ό« °s
(ί7> (53)
57
Σ ht)
7. - γ γ =1.63
(58) (54)
58
Is
Σ (t)
t = 5 5
8. y. ν = 1.67
(5β> (SI)
59
Σ h•M
- = 1.49
ID, 1O S
(βο> (55)
, 9
k
» = τ" Σ ki = 2·19
i= 1
ki has been rounded off to 2.00.
141
TABLE A - 5 . 1 * . Composition of T 0 and I . Target Corresponding
1963 1964 1965
Primary Production YDp 26,597 27,433 28,274

Ip 2,944 2,972 2,996
Manufacturing TDra 16,483 18,116 19,882
Im 3,532 3,828 4,148
Construction TDf 5,109 5,409 5,726
Ir
Electricity, Gas & Water
works TDe 1,811 2,005 2,215
le 1,680 1,824 1,984
Transport & Communications T Dc 6,153 6,591 7,060
le 4,221 4,518 4,833
Dwellings** TD<1 6,052 6,296 6,547
Id 2,761 2,871 2,970
Services T0s 22,944 24,296 25,725
Is 2,858 3,038 3,224
TOTAL TD 85,149 90,146 95,429

I 17,996 19,051 20,155
Incremental c/o Ratio 3.42 3.41 3.40
Per Capita TD 9,943 10,430 10,940
* TD = Gross Domestic Product at factor cost

I = Gross Fixed Capital Formation
** XDd = Income from Dwellings
Id = Gross Investment in Housing.
142
to Manufacturing Equal to 26% of T D , and S = 21°/o
1966 1967 1968 1969 1970 1971 1972
29,123 29,979 30,840 31,703 32,565 33,423 34,273

3,014 3,021 3,017 3,003 2,975
21,796 23,870 26,117 28,551 31,187 34,041 37,130
4,494 4,868 5,272 5,708 6,178
6,062 6,420 6,799 7,202 7,630 8,085 8,568
2,443 2,691 2,960 3,252 3,568 3,912 4,284

2,152 2,336 2,528 2,752 2,976
7,562 8,099 8,676 9,293 9,955 10,664 11,425
5,193 5,553 5,958 6,381 6,849
6,808 7,078 7,357 7,645 7,943 8,251 8,568
3,069 3,168 3,278 3,388 3,487
27,244 28,856 30,568 32,388 34,321 36,374 3-8,558
3,424 3,640 3,866 4,106 4,368
101,038 106,993 113,317 120,034 127,169 134,750 142,806

21,346 22,586 23,919 25,338 26,833
3.38 3.37 3.36 3.35 3.34 3.33
11,478 12,043 12,639 13,265 13,926 14,621 15,356
143
TABLE A - 5 . 2 * . Composition of TD and I . Target Corresponding
1963 1964 1965
Primary Production TDp 26,596 27,331 28,059

Ip 2,548 2,538 2,520
Manufacturing YDm 16,484 18,216 20,093
Im 3,754 4,078 4,428
Construction T„ r 5,109 5,408 5,725
Ir
works T De 1,811 2,005 2,215
le 1,680 1,824 1,984
le 4,212 4,518 4,842
Dwellings** T Dd 6,052 6,295 6,547
Id 2,772 2,871 2,970
Services YDs 22,944 24,295 25,724
Is 2,858 3,038 3,226
TOTAL TD 85,149 90,141 95,422

I 17,824 18,867 19,970
Incrementai c/o Ratio 3.39 3.38 3.36
Per Capita YD 9,943 10,429 10,939
* TD = Gross Domestic Product at factor cost

** YDd = Income from Dwellings
144
to Manufacturing Equal to 27% of T D , and S = 2 1 %
1966 1967 1968 1969 1970 1971 1972
28,784 29,504 30,213 30,910 31,588 32,244 32,872

2,482 2,440 2,373 2,296 2,198
22,132 24,346 26,750 29,359 32,189 35,259 38,589
4,808 5,218 5,650 6,140 6,660
6,062 6,420 6,801 7,203 7,632 8,090 8,575
2,443 2,691 2,960 3,252 3,570 3,914 4,288

2,152 2,336 2,544 2,752 2,992
7,561 8,099 8,676 9,295 9,959 10,670 11,434
5,193 5,571 5,976 6,399 6,876
6,808 7,078 7,357 7,647 7,946 8,256 8,575
3,069 3,190 3,289 3,410 3,509
27,243 28,856 30,571 32.395 34,334 36,395 38,589
3,430 3,648 3,878 4,122 4,388
101,033 106,994 113,328 120,061 127,218 134.828 142,922

21,134 22,403 23,720 25,119 26,623
3.35 3.34 3.33 3.31 3.30 3.29
11,477 12,043 12,640 13,268 13,931 14,630 15,368
145
TABLE A - 5. 3*. Composition of T D and I . Target Corresponding to
1963 1964 1965
Primary Production TDp 26,595 27,230 27,847

Ip 2,159 2,110 2,040
Manufacturing TDm 16,485 18,317 20,307
Im 3,980 4,330 4,710
Construction TDr 5,109 5,408 5,726
Ir
works TDe 1,811 2,005 2,215
le 1,680 1,824 1,984
Transport & Communications YDc 6,153 6,591 7,060
le 4,221 4,518 4,851 '
Dwellings** TDd 6,052 6,296 6,547
Id 2,761 2,871 2,981
Services TDs 22,944 24,295 25,752
Is 2,860 3,042 3,232
TOTAL TD 85,149 90,142 95,427

I 17,661 18,695 19,798
Incrementai e/ο Ratio 3.36 3.34 3.3Î
Per Capita T D 9,943 10,429 10,940
* T0 = Gross Domestic Product at factor cost

I = Gross Fixed Capital Formacion
** T Dd = Income from Dwellings
146
o f Ύ a n d
Manufacturing Equal to 28 % α> S = 21 %
1966 1967 1968 1969 1970 1971 1972
28,450 29,033 29,592 30,122 30,617 31,070 31,475

1,956 1,855 1,732 1,585 1,417
22,472 24,827 27,388 30,173 33,198 36,487 40,059
5,122 5,570 6,050 6,578 7,144
6,063 6,421 6,802 7,207 , 7,638 8,096 8,584
2,443 2,691 2,961 3,254 3,572 3,917 4,292

2,160 2,344 2,544 2,760 3,000
7,562 8,101 8,679 9,299 9,965 10,679 11,445
5,202 5,580 5,994 6,426 6,894
6,808 7,079 7,360 7,650 7,951 8,262 8,584
3,091 3,190 3,311 3,421 3,542
27,246 28,862 30,581 32,409 34,354 36,425 38,628
3,438 3,656 3,890 4,142 4,406
101,044 107,015 113,363 120,114 127,295 134,963 143,067

20,969 22,195 23,521 24,912 26,403
3.32 3.30 3.29 3.28 3.26 3.25
11,478 12,046 12,644 13,274 13,939 14,641 15,384
147
TABLE A - 5 . 4 * . Composition of YD and I . Target Correspondu)
1963 1964
Primary Production Y0 26,597 27,506 28,419

Ip 3,196 3,245 3,283
Manufacturing T0m 16,483 18,164 19,984
Im 3,640 3,956 4,302
Construction YDf 5,109 5,423 5,755
Ir
works T0e 1,811 2,010 2,226
le 1,728 1,888 2,048
Ic 4,383 4,707 5,067
Dwellings** YDd 6,052 6,312 6,581
Id 2,959 3,069 3,190
Services YDs 22,944 24,360 25,857
Is 2,994 3,190 3,394
TOTAL YD 85,149 90,384 95,918

I 18,900 20,055 21,284
Per Capita YD 9,943 10,457 10,996
* YD = Gross Domestic Product at factor cost

148
Manufacturing E q u a l to 2 6 % of Y 0 , and S = 2 2 %
1966 1967 1968 1969 1970 1971 1972
29,346 30,284 31,232 32,187 33,146 34,105 35,061

3,318 3,343 3,357 3,357 3,346
21,962 24,113 26,449 28,987 31,743 34,735 37,983
4,672 5,076 5,512 5,984 6,496
6,109 6,485 6,885 7,312 7,766 8,250 8,765
2,462 2,718 2,998 3,301 3,632 3,991 4,383

2,240 2,424 2,646 2,872 3,136
7,619 8,182 8,786 9,435 10,132 10,882 11,687
5,436 5,841 6,273 6,750 7,245
6,860 7,150 7,450 7,761 8,084 8,419 8,765
3,300 3,421 3,553 3,685 3,806
27,452 29,149 30,957 32,882 34,932 37,116 39,444
3,616 3,850 4,100 4,368 4,656
101,810 108,081 114,757 121,865 129,435 137,498 146,088

22,582 23,955 25,441 27,016 28,685
3.39 3 .38 3 .37 3.36 3.35 3.34
11,565 12,166 12,799 13,467 14,174 14,919 15,708
149
TABLE A - 5 . 5 * . Composition of YD and I. Target Correspond^
1963 1964
Primary Production Y Dp 26,596 27,403

Ip 2,800 2,804
Manufacturing Y Dm 16,484 18,264
Im 3,864 4,210
Construction Y 0r 5,109 5,422
Ir
works YDe 1,811 2,010
le 1,728 1,888
Transport & Communications Y 0c 6,153 6,609
Ic 4,374 4,716
Dwellings** Y Dd 6,052 6,312
Id 2,948 3,080
Services YDs 22,944 24,359
Is 2,994 3,188
TOTAL YD 85,149 90,379 95,911

I 18,708 19,886 21,086
Per Capita YD 9,943 10,457 10,995

** YD<J = Income from Dwelligs
150
to Manufacturing Equal to 27% of Y 0 , and S = 22%
1966 1967 1968 1969 1970 1971 1972
29,004 29,803 30,597 31,381 32,151 32,902 33,628

2,779 2,744 2,695 2,629 2,541
22,301 24,594 27,090 29,806 32,763 35,979 39,477
4,992 5,432 5,914 6,432 6,996
6,108 6,485 6,885 7,315 7,769 8,255 8,772
2,462 2,718 2,998 3,302 3,633 3,994 4,386

2,240 2,432 2,648 2,888 3,136
7,619 8,182 8,787 9,437 10,136 10,888 11,697
5,445 5,850 6,291 6,768 7,281
6,860 7,150 7,451 7,763 8,088 8,424 8,773
3,311 3,432 3,575 3,696 3,839
27,450 29,149 30,960 32,889 34,946 37,138 39,477
3,622 3,858 4,114 4,384 4,678
101,804 108,081 114,768 121,893 129,486 137,580 146,210

22,389 23,748 25,237 26,797 28,471
3.36 3.35 3.34 3.32 3.31 3.30
11,565 12,166 12,800 13,470 14,179 14,928 15,722
151
TABLE A - 5.6*. Composition of YD and I . Target Corresponding
1963 1964 1965
Primary Production Y Dp 26,595 27,302 27,990

Ip 2,408 2,369 2,313
Im 4,092 4,466 4,872
Construction YDr 5,109 5,423 5,755
Ir
works YDe 1,811 2,010 2,226
le 1,728 1,888 2,056
" Ic 4,383 4,716 5,067
Dwellings** Y Dd 6,052 6,312 6,581
Id 2,959 3,069 3,201
Services YDs 22,944 24,359 25,857
Is 2,996 3,194 3,402
TOTAL YD 85,149 90,380 95,916

I 18,566 19,702 20,911
Per Capita YD 9,943 10,457 10,996

152
to Manufacturing Equal to 28% of YD, and S = 22°/0
1966 1967 1968 1969 1970 1971 1972
28,667 29,328 29,968 30,582 31,164 31,706 32,200

2,240 2,149 - 2,037 1,897 1,729
22,644 25,080 27,737 30,634 33,791 37,232 40,982
5,314 5,794 6,314 6,882 7,500
6,109 6,487 6,888 7,317 7,774 8,262 8,782
2,462 2,719 2,999 3,304 3,636 3,997 4,391

2,240 2,440 2,656 2,888 3,152
7,620 8,183 8,789 9,441 10,143 10,897 11,709
5,454 5,868 6,318 6,786 7,308
6,860 7,151 7,453 7,767 8,093 8,431 8,782
3,322 3,454 3,586 3,718 3,861
27,454 29,155 30,970 32,904 34,968 37,169 39,518
3,630 3,868 4,128 4,402 4,698
101,816 108,103 114,804 121,949 129,568 137,694 146,364

22,200 23,573 25,039 26,573 28,248
3.33 3.31 3.30 3.29 3.27 3.26
11,566 12,168 12,804 13,477 14,188 14,941 15,738
153
TABLE A - 5 . 7 * . Composition of YD and I. Target Corresponding
1963 1964 1965
Primary Production Y0p 26,597 27,578 28,564

Ip 3,451 3,518 3,577
Im 3,750 4,088 4,454
Construction Y 0r 5,109 5,437 5,784
Ir
works Y De 1,811 2,016 2,238
le 1,776 1,936 2,128
Transport & Communications Y 0c 6,153 6,626 7,132
le 4,554 4,905 5,283
Dwellings** YDd 6,052 6,329 6,615
Id 3,146 3,267 3,410
Services YDs 22,944 24,425 25,989
Is 3,128 3,344 3,566
TOTAL YD 85,149 90,622 96,408

I 19,805 21,058 22,418
Per Capita YD 9,943 10,485 11,052

** Y Dd = Income from Dwellings
154
to Manufacturing Equal to 26% YD, and S = 2 3 %
1966 1967 1968 1969 1970 1971 1972
29,569 30,591 31,627 32,675 33,733 34,796 35,862

3,626 3,668 3,703 3,721 3,731
22,130 24,357 26,783 29,427 32,305 35,439 38,851
4,852 5,288 5,756 6,268 6,824
6,155 6,550 6,973 7,423 7,903 8,417 8,965
2,480 2,746 3,035 3,351 3,696 4,073 4,483

2,312 2,528 2,760 3,016 3,280
7,677 8,264 8,897 9,578 10,312 11,102 11,954
5,697 6,129 6,606 7,110 7,668
6,912 7,222 7,544 7,879 8,228 8,590 8,965
3,542 3,685 3,839 3,982 4,125
27,661 29,444 31,348 33,381 35,551 37,869 40,345
3,808 4,066 4,340 4,636 4,952
102,584 109,174 116,207 123,714 131,728 140,286 149,425

23,837 25,364 27,004 28,733 30,580
3,40 3,39 3,38 3,37 3,36 3,35
11,653 12,289 12,961 13,672 14,425 15,222 16,067
155
TABLE A - 5. 8*. Composition of YD and I. Target Corresponding
1963 1964 1965

IP 3,052 3,070 3,084
Manufacturing Y Dm 16,484 18,312 20,299
Im 3,974 4,344 4,744
Construction Y„ r 5,109 5,437 5,784
Ir
works YD(5 1,811 2,015 2,237
Ie 1,776 1,944 2,128
Ie 4,554 4,905 5,283
Dwellings** Y Bd 6,052 6,329 6,114
Id 3,135 3,278 3,410
Services YDs 22,944 24,423 25,988
Is 3,130 3,342 3,570
TOTAL YD 85,149 90,617 96,401

I 19,621 20,883 22,219
Per Capita YD 9,943 10,484 11,051
* Y0 = Gross Domestic Product at factor Cost

** Y„ d = Income from Dwelligs
156
to Manufacturing Equal to 27% of YD, and S = 2 3 %
1966 1967 1968 1969 1970 1971 1972
29,224 30,105 30,984 31,857 32,721 33,570 34,398

3,077 3,056 3,024 2,972 2,898
22,471 24,843 27,432 30,259 33,343 36,709 40,380
5,178 5,654 6,168 6,732 7,342
6,155 6,550 6,972 7,425 7,907 8,422 8,973
2,480 2,746 3,036 3,352 3,698 4,075 4,487

2,320 2,528 2,768 3,016 3,296
7,677 8,264 8,898 9,580 10,316 11,109 11,964
5,706 6,138 6,624 7,137 7,695
6,912 7,222 7,545 7,881 8,231 8,595 8,973
3,553 3,696 3,850 4,004 4,158
27,659 29,444 31,351 33,388 35,565 37,892 40,380
3,814 4,074 4,354 4,654 4,976
102,578 109,174 116,218 123,742 131,781 140,372 149,555

23,648 25,146 26,788 28,515 30,365
3.37 3.36 3.34 3.33 3.32 3.31
11,653 12,289 12,962 13,675 14,431 15,231 16,081
157
TABLE A - 5 . 9 . * Composition of Y0 and I. Target Corresponding to
1963 1964 1965

IP 2,657 2,632 2,590
Im 4,202 4.602 5,036
Construction YD[. 5,109 5,437 5,784
Ir
works YDe 1,811 2,015 2,238
le 1,784 1,944 2,120
Transport & Communicatios YDc 6,153 6,626 7,132
le 4,554 4,914 5,292
Dwellings** Y 0d 6,052 6,329 6,615
Id 3,146 3,278 3,421
Services YDs 22,944 24,423 25,989
Is 3,132 3,348 3,576
TOTAL YD 85,149 90,618 90,406

I 19,475 20,718 22,035
Incrementai c/o Ratio 3.38 3.36 3.35
Per Capita YD 9,943 10,485 11,052

** YD(J = Income from Dwellings
158
Manufacturing Equal to 28% of Y 0 , and S = 23%
1966 1967 1968 1969 1970 1971 1972
28,885 29,625 30,348 31,047 31,717 32,350 32,938

2,531 2,447 2,345 2,216 2,058
22,816 25,334 28,088 31,099 34,391 37,989 41,921
5,508 6,022 6,584 7,196 7,864
6,155 6,552 6,975 7,428 7,912 8,429 8,983
2,481 2,746 3,037 3,354 3,700 4,079 4,492

2,328 2,536 2,768 3,032 3,304
7,678 8,266 8,901 9,585 10,323 11,119 11,978
5,715 6,156 6,642 7,164 7,731
6,913 7,224 7,547 7,885 8,236 8,602 8,983
3,553 3,718 3,861 4,026 4,191
27,663 29,451 31,361 33,404 35,589 37,925 40,424
3,820 4,086 4,370 4,672 4,998
102,591 109,198 116,257 123,802 131,868 140,493 149,719

23,455 24,965 26,570 28,306 30,146
3,34 3,32 3,31 3,29 3,28 3,27
11,654 12,292 12,966 13,681 14,440 15,244 16,099
159
TABLE A - 5 . 1 0 * . Composition of YD and I . Target Corresponding to
1963 1964 1965
Primary Production YD 26,597 27,607 28,637

IP 3,605 3,731 3,861
Im 3,814 4,186 4,598
Ir
works YDe 1,811 2,018 2,243
le 1,800 1,992 2,184
le 4,662 5,049 5,499
Dwellings** YDd 6,052 6,336 6,631
Id 3,245 3,443 3,619
Services YDs 22,944 24,450 26,056
Is 3,212 3,462 3,730
TOTAL YD 85,149 90,717 96,654

I 20,338 21,863 23,491
Incrementai c/o Ratio 3.44 3.43 3
Per Capita YD 9,943 10,496 11,080

160
-
Manufacturing Equal to 2 6 % of Y D , and 3 = 23.5 • 2 5 %
1966 1967 1968 1969 1970 1971 1972
29,703 30,806 31,946 33,120 34,329 35,571 36,845

3,990 4,109 4,232 4,347 4,459
22,230 24,529 27,053 29,827 32,876 36.228 39,915
5,048 5,548 6,098 6,704 7,374
6,183 6,597 7,043 7,524 8,043 8,605 9;244
2,492 2,765 3,066 3,397 3,762 4,163 4,606

2,408 2,648 2,920 3,208 3,544
7,712 8,323 8,986 9,708 10,494 11,349 12,281
5,967 6,498 7,074 7,695 8,388
6,944 7,273 7,620 7,987 8,373 8,781 9,211
3,817 4,037 4,246 4,488 4,730
27,787 29,652 31,664 33,835 36,179 38,712 41,450
4,024 4,342 4,688 5,066 5,476
103,051 109,945 117,378 125,398 134,056 143,409 153,519

25,254 27,182 29,258 31,508 33,971
3,41 3,4C 3,39 3,38 3,37 3,35
11,706 12,376 13,091 13,858 14,680 15,561 16,507
161
li
TABLE A - 5 . 1 1 * . Composition of YD and I . Target Corresponding
1963 1964 1965
Primary Production T Dp 26,596 27,504 28,419

IP 3,203 3,287 3,360
Im 4,040 4,444 4,890
Construction Y„ r 5,109 5,443 5,799
Ir
works YDe 1,811 2,017 2,243
Ie 1,808 1,992 2,184
Ie 4,653 5,058 5,499
Dwellings** YDd 6,052 6,335 6,631
Id 3,256 3,432 3,630
Services YDs 22,944 24,449 26,054
Is 3,210 3,462 3,734
TOTAL Y0 85,149 90,712 96,647

I 20,170 21,675 23,297
Per Capita YD 9,943 10,495 11,080

162
to Manufacturing Equal to 27% YD, and S = 23,5 - 2 5 %
1966 1967 1968 1969 1970 1971 1972
29,358 30,318 31,296 32,292 33,301 34,319 35,342

3,423 3,486 3,532 3,563 3,581
22,573 25,018 27,709 30,671 33,934 37,527 41,488
5,382 5,924 6,526 7,186 7,922
6,183 6,597 7,045 7,525 8,046 8,610 9,220
2,492 2,765 3,066 3,398 3,763 4,166 4,610

2,408 2,656 2,920 3,224 3,552
7,712 8,323 8,987 9,711 10,498 11,357 12,293
5,976 6,516 7,083 7,731 8,424
6,943 7,273 7,621 7,989 8,377 8,787 9,220
3,828 4,048 4,268 4,510 4,763
27,785 29,652 31,667 33,843 36,195 38,737 41,488
4,030 4,352 4,704 5,084 5,502
103,046 109,946 117,391 125,429 134,114 143,503 153,661

25,047 26,982 29,033 31,298 33,744
3.38 3.36 3.35 3.34 3.33 3.32
11,706 12,376 13,093 13,861 14,686 15,571 16,523
163
TABLE A - 5 . 1 2 * . Composition of YD, and I . Target Corresponding to
1963 1964 1965
Primary Production YDp 26,595 27,403 28,205

Ip 2,807 2,842 2,863
Im 4,270 4,704 5,186
Ir
Electicity, Gas & Water
works YDe 1,811 2,017 2,243
le 1,808 1,992 2,192
Ie 4,653 5,067 5,508
Dwellings** YDd 6,052 6,335 6,631
Id 3,256 3,443 3,641
Services YDs 22,944 24,449 26,056
Is 3,214 3,466 3,740
TOTAL YD 85,149 90,713 96,652

I 20,008 21,514 23,130
Per Capita YD 9,943 10,496 11,080 '

** Y Dd = Income from Dwellings
164
Manufacturing Equal to 28% of Y„, and S = 23.5 - 2 5 %
1966 1967 1968 1969 1970 1971 1972
29,017 29,835 30,655 31,471 32,280 33,074 33,845

2,870 2,856 2,832 2,779 2,699
22,920 25,513 28,372 31,524 35,002 38,840 43,076
5,718 6,304 6,956 7,676 8,472
6,184 6,598 7,046 7,530 8,052 8,618 9,231
2,492 2,766 3,067 3,399 3,766 4,170 4,615

2,408 2,656 2,936 3,232 3,560
7,713 8,325 8,990 9,716 10,506 11,367 12,307
5,985 6,534 7,110 7,749 8,460
6,944 7,275 7,624 7,993 8,383 8,795 9,231
3,839 4,059 4,290 4,532 4,796
27,789 29,659 31,679 33,861 36,220 38,773 41,538
4,040 4,364 4,718 5,106 5,530
103,059 109,971 117,433 125,494 134,209 143,637 153,843

24,860 26,773 28,842 31,074 33,517
3.35 3.33 3.32 3.31 3.30 3.28
11,707 12,379 13,098 13,868 14,697 15,586 16,542
165
TABLE A - 6.1. Program 21 - 26 Investment
Financing Projections
In million drs. at 1954 prices
Years — Sp- -Sg -D +V +1 =+F s
1963 .. .. 8,607 2,732 5,049 700 17,996 2,308

1964 .. .. 9,496 2,986 5,312 700 19,051 1,957
1965 .. .. 10,411 3,253 5,633 700 20,155 1,558
1966 .. .. 11,411 3,536 5,864 700 21,346 1,235

Years -Sp -Sg — D +v +1 = + Fs
1963 ... 8,609 2,732 5,040 700 17,824 2,143

1964 ... 9,495 2,985 5,294 700 18,867 1,793
1965 ... 10,420 3,252 5,606 700 19,970 1,392
1966 ... 11,418 3,536 5,827 700 21,134 1,053

Years -Sp -sg — D +v +1 = +Fs
1963 ... 8,611 2,732 5,032 700 17,661 1,986

1964 ... 9,498 2,985 5,278 700 18,695 1,634
1965 ... 10,426 3,253 5,581 700 19,798 1,238
1966 ... . 11,426 3,537 5,793 700 20,969 913
166
Years — Sb — Sg —D +V +1 =-|-F5
1963 .. . . 8,599 2,732 5,094 700 18,900 3175
1964 .. .. 9,517 2,997 5,405 700 20,055 2836
1965 .. .. 10,474 3,277 5,779 700 21,284 2454
1966 .. .. 11,507 3,576 6,070 700 22,582 2129

Years -Sp -sg -D +v + 1 = + Fs

1963 ... . 8,601 2,732 5,085 700 18,708 2990
1964 ... . 9,519 2,997 5,386 700 19,886 2684
1965 ... . 10,477 3,277 5,752 700 21,086 2280
1966 ... . 11,513 3,575 6,032 700 22,389 1969

Years — SP - Sg -D + V + I = + Fs
1963 .. .. 8,602 2,732 5,077 700 18,566 2,855

1964 .. .. 9,522 2,997 5,371 700 19,702 2,512
1965 .. .. 10,483 3,277 5,727 700 20,911 2,124
1966 .. .. 11,521 3,576 5,997 700 22,200 1,806
167
Years D + V + 1 = +Fs
1963 8,582 2,732 5,192 700 19,805 3,999

1964 9,531 3,009 5,551 700 21,058 3,667
1965 10,521 3,302 5,979 700 22,418 3,316
1966 11,592 3,615 6,329 700 23,837 3,001

Years — SP •β. D + V + I = + Fs
1963 .. .. 8,593 2,732 5,131 700 19,621 3,865

1964 .. .. 9,543 3,009 5,480 700 20,883 3,551
1965 .. .. 10,535 3,302 5,898 700 22,219 3,184
1966 .. .. 11,608 3,614 6,238 700 23,648 2,888

Years -S c •S« D + V + 1 + Fs
1963 .. .. 8,594 2,732 5,123 700 19,475 3,726

1964 .. .. 9,546 3,009 5,464 700 20,718 3,399
1965 .. .. 10,540 3,302 5,874 700 22,035 3,019
1966 .. .. 11,616 3,615 6,204 700 23,455 2,720
168
TABLE A - 6.10. Program (23.5 - 25) - 26 Investment
Years -Sp -Sg -D +v + 1 = + Fs

1963 8,588 2,732 5,158 700 20,338 4,560
1964 .... 9,548 3,014 5,545 700 21,863 4,456
1965 .... 10,557 3,315 6,015 700 23,491 4,304
1966 .... 11,655 3,638 6,412 700 25,254 4,249

Years -Sb - Sg -D +V +1 =+F s
1963 .. .. 8,590 2,732 5,149 700 20,170 4,399

1964 . ... 9,551 3,014 5,526 700 21,675 4,284
1965 .. .. 10,560 3,314 5,987 700 23,279 4,118
1966 .. .. 11,661 3,638 6,383 700 25,047 4,065

Years - Sp — Sg -D + V +1 =+F s
1963 .. .. 8,591 2,732 5,141 700 20,008 4,244

1964 .. .. 9,554 3,014 5,510 700 21,514 4,136
1965 .. .. 10,566 3,314 5,962 700 23,130 3,988
1966 .. .. 11,669 3,639 6,350 700 24,860 3,902
169
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171
TABLE A - 8 . 1 . Productivity
19 5 1
Number Product
GDP of per
S e c t o r s in million employed employed
drs. persons. person.
In drs.
Primary Production 15,560 1,900,000 8,190

Manufacturing 7,348 426,104 17,245
Construction 1,260 67,764 18,595
Electricity, Gas & Water works 472 10,922 43,215
Transport & Communications 3,708 128,038 28,960
Services 15,680 598,581 26,320
Total 44,028 3,144,318 14,000
Source :
GDP 1951: National Accounts of Greece No. 9
GDP 1961: National Accounts of Greece Revised estimates
Employment 1951: Population Census 1951
Employment 1961: Population Census 1961. Estimates given by a
2% sample drawn from the Census returns.
172
Rates 1951 - 1961
19 6 1
Number Product
GDP of per Productivity
in million employed employed rates
drs. persons. person. In drs. %
24,931 1,940,000 12,851 4.6

14,890 444,000 33,536 6.9
4,757 148,700 31,990 5.6
1,496 21,000 71,240 5.1
6,390 150,300 42,510 3.9
25,970 695,000 37,367 3.6
78,434 3,399,000 23,100 5.1
N o t e : Given that extensive underenumeration of females employed in

agriculture had taken place in the 1951 Census, we relied on the level
of female participation in the agricultural labor force in 1961 in an
attempt to correct the Census returns and achieve comparability
between the 1951 and 1961 employment figures.
173
TABLE A - 8.2. Employment
Estimates for the program -27 and for productivity rates
a) Lower than those obser d between 1951 - 61 by 0.5
GDP 1972 Productivity Product Number

Sectors in million rate per employed of employed
drs. % person. In drs. persons.
Primary Production 34,398 3.5 18,760 1,834,000

Manufacturing 40,380 6.5 67,050 602,000
Construction 8,973 5.0 54,710 164,000
works 4,487 4.5 115,600 39,000
Transport&Communications 11,964 3.5 62,060 193,000
Services 49,353 3.0 51,730 954,000
Total 149.555 5.0 39,500 3,786,000
* The computed rate was 4 . 6 % si ce, however, 1961 was an unusually

See Table A - 8 . 1 .
174
Requirements by Sectors 1972
b ) Equal to those observed between 1951 - 61
c) Higher than those observed between 1951 - 61 by 0.5
Productiv. Product Number Productiv. Product Number

rate per employed of employed rate per employed of employed
% person. In drs. persons. % person. In drs. persons.
4.0* 19,780 1,739,000 4.5 20,860 1,649,000

7.0 70,590 572,000 7.5 74,310 543,000
5.5 57,640 156,000 6.0 60,730 148,000
5.0 121,800 37,000 5.5 128,400 35,000

4.0 65,440 183,000 4.5 68,990 173,000
3.5 54,560 905,000 4.0 57,520 858,000
5.5 41,600 3,592,000 6.0 43,900 3,406,000
good year for agriculture, we have arbitrarily lowered the rate to 4.0%.
175
TABLE A - 8.3. Employment
Estimates for the program (23.5-25)-27 and for productivity rates
a) Lower than those observed between 1951 - 61 by 0.5
a
GDP 1972 Productivity Product Number

Sectors in million rate per employed of employed
drs. % person. In drs. persons.
Primary Production 35,342 3.5 18,760 1,884,000

Manufacturing 41,488 6.5 67,050 619,000
Construction 9,220 5.0 54,710 169,000
works 4,610 4.5 115,600 40,000
Transport&Communications 12,293 3.5 62,060 198,000
Services 50,708 3.0 51,730 280,000
Total 153,661 5.0 39,500 3,890,000
* The computed rate was 4.6% since, however, 1961 was an unusually
See Table A - 8 . 1 .
176
Requirements by Sectors 1972
b) Equal to those observed between 1951 -61
c) Higher than those observed between 1951 - 61 by 0.5
Productivity Product Number Productivity Product Number

rate per employed of employed rate per employed of employed
% person. In drs. persons. % person. In drs. persons.
4.0* 19,760 1,787,000 4.5 20,860 1,694,000

7.0 70,590 588,000 7.5 74,310 558,000
5.5 57,640 160,000 6.0 60,730 152,000
5.0 121,800 38,000 5.5 128,400 36,000

4.0 65,440 188,000 4.5 68,990 178,000
3.5 54,560 929,000 4.0 57,520 882,000
5.5 41,640 3,690,000 6.0 43,900 3,500,000
good year for agriculture, we have arbitrarily lowered the rate to 4.0%.
177
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179
AD D E N DUM
It was not stressed sufficiently (see, however, footnote on

page 91) that the M and Xr / Ms projections for 1963-1966
relate exclusively to the l e v e l s of G.D.P. associated with the
various programs. Given the form of the regressions, it was not
possible to evaluate the impact of s t r u c t u r a l variation on
M and ΧΓ UM* .
CORRIGENDA
Page 79, line 6 : «6.2» to «3.2»

Page 81, line 5 : «T » to «Tfp»
Page 110, line 8 : «j» to «J»
Page 110, line 9 : «YD(t) and Ij (t+2 ) » to «^Dft+a) an<^ *J;t) "
Page 112, last line : Insert «1959*» between «1958*» and «I960*»
Cover designed by
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Andreas G. Papandreou - A Strategy For Greek Economic Development

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Andreas G. Papandreou - A Strategy For Greek Economic Development

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CENTER OF ECONOMIC RESEARCH

Research Monograph Series

CONTOS PRESS Co.

I should like to thank the Center team which worked on

The Center of Economic Research in Greece was estab-

1. 1. Active Population Estimates for 1961 Page 26

TABLES IN THE APPENDIX

A - l . l . Gross Composition of Domestic Product at »

In undertaking this study we had primarily two purposes

* A somewhat similar approach was employed by H. R. Che-

SALIENT FEATURES OF GREEK

World War II ended in 1945 for most of Europe.

* High Board of Reconstruction A. S. Α., Memorandum on

The problems of inflation and the balance of pay-

The overall performance of the economy in the

* Tables A - l . l through A —1.6 and A —2.1 through

* See A. Pepelasis and P: A. Totopoulos, Labor Surplus in

Greece has recently concluded an association agree-

TABLE 1.1. Active Population Estimates for 1961

Total Active Population, (000) 3,663

Estimates derived from a 2 % sample drawn from the

TABLE 1.2. Number of Persons Permanently Emigrating

S o u r c e : National Statistical Service of Greece.

PLANNING RESOURCE ALLOCATION

Not too long ago economists and social scientists

In discussions concerning planning for development

It would be an unusual policy maker that would

The preceding discussion represents the process

* C. Clark, The Conditions of Economic Progress, 3rd ed.

leads to the conclusion that we can talk in terms of

of the economy in question and of the direction in

In what follows we present the results of a quanti­

* Chenery, op. cit.

A glance at table 3.1 (and the related background

Observed Standard Observed

Primary Production 33.8 36.8 30.2

Total 100.0 100.0 100.0

Remarks concerning computations :

30.2 24.0„ 23.1 21.0 19.0

100.0 100.0 100.0 100.0 100.0

The structural targets in the alternative programs

T A B L E 3.2. Incremental Capital - Output

1. Primary Production 3.5

* In fact, the ratios depicted above are incremental Gross

Total 100 100 100

* Shares of Gross Domestic Product at factor cost.

resource endowment, such as Greece,** manufacturing

** A similar proposition could be made, say, for Italy and

CU *d* es Ο en oo m ο co Ι> r-~ de co i o co IO Ό

*An alternative target structure for 1972 involving the ma-

tions 7%, Services (including income from dwellings) 36%.

* The reader should be warned that in the case of transport

* It may be of interest to report that the annual average

* We can continue as follows: For S = 26%, TD will grow

The first and fundamental test for each alternative

* Fs or external financing is defined as net capital flow

* (See H. Wold, Demand Analysis. New York, John Wiley

02.3, [JT]„ [£}„ JT|2.4. g . ^ «g

may also be due to the methods employed in the pre-

* It stands to reason, of course, that these projections will

TABLE 3.4.5. Summary of Information of Tables A - 6 .

* Percent of Gross Domestic Product.

Although somewhat on the conservative side (as

In what follows we present the results of a quanti

CU d es Ο en oo m ο co Ι> r-~ de co i o co IO Ό

Tables A-7.1, A-7.2 and 3.5.1 through 3.5.4 incorpor

The overall incremental capital-output ratio (actually, the in

α -* to ΤΗ es ο co - <Ji CO ·•# CO CO

kp has been set equal to 3.50 on the assumption that observa