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Economic diversification in MENA oil exporters: Understanding the role of governance

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  • Matallah, Siham

Abstract

The present paper aims, on the one hand, to test the impact of oil rents on economic growth and examine the main symptoms of the resource curse phenomenon in oil-abundant MENA countries, and on the other hand, to investigate the role of governance in avoiding the resource curse and turning oil rents into a tool for economic diversification in 11 MENA oil exporters (Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, United Arab Emirates, and Yemen) over the period 1996–2017, by using pooled OLS, fixed effects, random effects and generalized method of moments (GMM) estimators. The main findings indicate that MENA oil exporters' growth is greatly and positively influenced by oil rents. Likewise, these economies have been diagnosed with resource curse. The results also show that governance is a key ingredient in the diversification recipe, while, oil rents frustrate economic diversification by encouraging rent-seeking activities. The multiplicative interaction term between governance index and oil rents indicates that the combined effect of these two variables is effective in promoting diversification. In a nutshell, the enhancement of MENA oil-exporters’ good governance capabilities is the way out of the resource curse because it can turn oil wealth into a boon and offer these oil-abundant countries more opportunities for economic diversification and thereby can enable them to generate robust and sustainable economic growth.

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  • Matallah, Siham, 2020. "Economic diversification in MENA oil exporters: Understanding the role of governance," Resources Policy, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:jrpoli:v:66:y:2020:i:c:s030142071930501x
    DOI: 10.1016/j.resourpol.2020.101602
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    More about this item

    Keywords

    Oil rents; Resource curse; Governance; Oil-abundant MENA countries;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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