Economic Performance in MENA: it Is in the Institutions

Many studies suggest regime type—particularly democracy—is associated with economic performance. However, in the Middle East and North Africa, regimes are mostly non-democracies, yet there is a wide variation of economic performance. To understand this variation, this study investigates how institutions impact economic performance in MENA countries. The study utilizes panel data on twenty-one MENA states from 1996 to 2018. The main results of the appropriate fixed-effects model suggest that institutional quality impacts economic performance across countries in MENA. Specifically, the findings show that improvements in labor, investment, public, and political institutions are the key to enhancing real per capita GDP. MENA countries’ different research endowments carry different institutional deliverables in their economies. Resource-rich, labor-poor countries, and OECD countries experience better capacity for the effects of institutions on economic performance. Conversely, labor-abundant MENA countries are shown to experience lower economic performance due to the weak existing institutions. Results of the study provide policy implication to enhance the knowledge setting within the institutions for better economic performance.