Testing the External Shock Narrative of the Conflict on Transition Towards Knowledge Economy in Syria

The theory of external shocks suggests that the underdevelopment of low-income countries is due to external shocks of various kinds: economic or political ones. This study endeavors to analyze the real causes that hindered and are hindering the Syrian economy from transitioning towards a knowledge-based economy before and during the conflict. To achieve these objectives, we apply the Documentary Research Method (DSM) and the Structural Vector Autoregression (SVAR) to measure the causal impact of the internal and external shocks on a number of innovation and knowledge creation–related variables, and the Synthetic Control Method (SCM) to measure the toll of different shocks on the transition to knowledge economy in Syria. The results indicate that, in the long run, external shocks do not provide a comprehensive explanation of the failure in building a knowledge-based economy in Syria. On the contrary, internal shocks in general, and the shock of liberal policies, are largely responsible for Syria’s failure to transition to a knowledge-based economy, and for the outbreak and development of the conflict. In light of the results, we propose a set of economic policies for the reconstruction of Syria based on a non-classical approach that orients the reconstruction process towards building a knowledge-based economy.