Technology, Political Economy, and Economic Development in the Middle East and North Africa

Abstract

Comparing the pace and extent of economic development across the developing regions yields that Arab countries have displaced a weak economic performance over the past 20 years, despite their favorable geo-strategic location and a high density of national and international structural adjustment efforts. Using cross-country regressions, this paper identifies two binding constraints to economic development in the Arab countries of the Middle East and North Africa (MENA): 1) Most countries are not able to apply or adopt existing technologies efficiently and 2) The economically inefficient allocation of resources is rooted deeply in regional political economy structures. These results challenge the scholarly debate, but can help to understand why international structural adjustment programs that focused on privatization and trade liberalization only showed limited success in the MENA region.

Technological Readiness in the Middle East and North Africa – Implications for Egypt

“…They find a strong positive impact from advances in physical infrastructure and human capital, and a negative impact from structural reform on growth in six MENA countries over the period from 1970 to 1999. A very recent study also points to a severe lack of technological capacities and innovative activities in the MENA region and shows that region-specific features such as rent-and continuity-oriented political economy structures are simultaneously important determinants and hampering factors to economic development in the MENA region that can partially explain an economically inefficient allocation of resources (Brach 2009). …”

The effects of FDI on voice and accountability in the MENA region

“…Ultimately, the lack of diversified industries, natural resource dependency as well as the presence of governments dominated by rent‐seeking behavior form the constraints to improvement of VA in this region. In this regard, Brach (2009) argues that the MENA governments are endowed with significantly rent revenues (such as the monopolistic and oil rents of state‐owned companies) that are neither extracted from their societies by taxation nor through economic productivity. As a result, the MENA governments do not need to justify the consumption or use of their revenues vis‐à‐vis the taxpayer, nor do they need to reinvest in production and economic processes to guarantee high revenues in future.…”

“…Additionally, as Milner and Mukherjee (2009) recommended in their study, there is a need of careful and systematic statistical testing of how capital openness in developing countries influences the level of democracy. Moreover, the MENA region is understudied and worthy of much more empirical work in respect of FDI, institutional quality and economic growth (Kandil, 2009; Brach, 2009). Therefore, focusing on this part of the world is an attempt to fill this gap.…”

Technological Readiness in the Middle East and North Africa – Implications for Egypt

“…Brach (2009) provides some fresh insights into economic institutions, yet there is still no explanation that is based on the ultimate unit of productivity and competitiveness: the firm.…”