‘Social’ Income Effects: Evaluating the Evaluation

The last two chapters have described very briefly our examination of the ‘social’ income effects of sample firms on host economies, under a variety of assumptions. The original UNCTAD studies went into much more detail about the method and reported the results (including those of several alternative assumptions not mentioned here) at greater length. The simulation model used was ingenious and powerful. It could handle some sixty to eighty items of information for every firm for each year, transforming each into ‘shadow’ values according to different assumptions, allowing for different rates of tariff, taxation and inflation on each, tracking down the groups which gained or lost from the welfare evaluation of each, and simulating a number of ‘alternative positions’ after allowing for different rates of domestic replacement, differing efficiencies, effects of changes in scale, ‘learning’, and so on. In fact, only a fraction of the simulator’s potential was used. The parameters required were missing, and the possibility of virtually endless simulation, in return for practically no real addition to our knowledge, was a strong deterrent.