nep-ara New Economics Papers
on Arab World
Issue of 2009‒02‒28
eight papers chosen by
Quentin Wodon
World Bank

  1. Oil Exports, Non Oil GDP and Investment in the GCC Countries By Harb, Nasri
  2. Economic growth, employment and poverty in the Middle East and North Africa By Mahmood Messkoub
  3. Railway and Ports Organization in the Republic of South Africa and Turkey: The Integrator’s Paradise? By Louis S. Thompson
  4. Sovereign Wealth Funds: Their Investment Strategies and Performance By Chhaochharia, Vidhi; Laeven, Luc
  5. Harnessing Windfall Revenues in Developing Economies: Sovereign Wealth Funds and Optimal Tradeoffs Between Citizen Dividends, Public Infrastructure and Debt Reduction By van der Ploeg, Frederick; Venables, Anthony J.
  6. Attitudes and Action: Public Opinion and the Occurrence of International Terrorism By Alan B. Krueger
  7. Regional dimensions of economic development in Iran: A new economic geography approach By Farmanesh, Amir
  8. Development and Growth in Mineral-Rich Countries By Gylfason, Thorvaldur

  1. By: Harb, Nasri
    Abstract: This paper studies the long and short-run relationship between oil exports, non oil GDP and investment in five major oil exporting countries. Its goal is to verify the effect of natural resources exports on the economic performance. It considers the effect of cross sectional correlations and uses the corresponding panel unit root tests to study the long-run characteristics of our series. The results show that resources' exports have no long-run relationship with the macro variables. A VAR analysis is used to estimate the short-run dynamics and shows that the effect of oil exports on those variables depends on local policies.
    Keywords: GCC; Natural Resources; Oil; Productivity; Investment; Labor Force; Unit root; Growth; Cointegration; VAR.
    JEL: O53 C23 C22 O40 F43
    Date: 2008–06
  2. By: Mahmood Messkoub
    Abstract: This paper  provides an assessment of economic growth, employment and poverty reduction in the Arab MENA region. Considering the high rate of unemployment (especially the youth unemployment) and poverty in most countries in the region employment and poverty impacts of growth are of particular concern to policy makers. In the short run for employment growth to be faster than output growth the employment elasticity of growth has to be greater than unity. This is an important condition that is rarely satisfied across all sectors and countries in the region, for good analytical and empirical reasons. For example growth in high productivity sectors will not boost total employment nor reduce poverty substantially in the short run, yet growth in high productivity sectors is essential for accumulation and long term growth. Moreover, if the poor were to benefit from an employment policy they should have been integrated in the sectors where jobs are created – the so called integrability condition of the ‘employment-poverty nexus. Public work projects have been one of the main short term instruments of job creation for the poor in the region, but there the long term impact on poverty has varied and depended crucially on their sustainability, their contribution to improving local infrastructure and economies. These mixed results in no way invalidate the importance of economic growth for unemployment and poverty reduction, but brings into focus the importance of going beyond short term policies for job creation and poverty reduction as well as complementing such policies with social policies both for poverty alleviation and improving skill levels of the work force.
    Keywords: economic growth, employment, unemployment, poverty, poverty alleviation, Middle East, North Africa
    Date: 2008
  3. By: Louis S. Thompson
    Abstract: This paper looks in detail at the cases of two countries that exhibit extreme cases of transport organization. In both countries, the railway and most of the ports are under unitary control, with essentially no regulation and only limited information available to assess behavior. If economies of scale are important, if the “integration” achieved by organizational unification is truly beneficial, and if competition is not needed to limit the behavior of the unified organizations, then these countries should be at the cutting edge of system performance, with high efficiency, low costs and excellent service. If the reverse is true, then they furnish at least a few data points for the analysis of the importance of diversity of organization and competition within the system.
    Date: 2009–02
  4. By: Chhaochharia, Vidhi; Laeven, Luc
    Abstract: Sovereign wealth funds have emerged as an important investor of global equity, attracting growing attention. Despite concerns that sovereign wealth fund investments may serve political objectives and be in conflict with national interests, little is known about the investment objectives and performance of sovereign wealth funds. We collect new data on foreign equity investments by sovereign wealth funds. We find that sovereign wealth funds largely invest to diversify away from industries at home but that they do so predominantly in countries that share the same culture, suggesting their investment rules are not entirely driven by profit maximizing objectives. Share prices of firms respond favorably when sovereign investment funds acquire stakes, in part because these investments often take place when firms are in financial distress. However, the long-run performance of equity investments by sovereign wealth funds tends to be poor, consistent with imperfect portfolio diversification and poor corporate governance.
    Keywords: Asset allocation; Corporate governance; Sovereign wealth funds
    JEL: G3
    Date: 2008–09
  5. By: van der Ploeg, Frederick; Venables, Anthony J.
    Abstract: A windfall of foreign aid or natural resource revenue faces government with choices of how to manage public borrowing, public asset accumulation, and the distribution of funds to households (across time and household types), particularly when the windfall is both anticipated and temporary. These choices are acute if some households do not have access to credit markets and are unable to smooth consumption, and if the country as a whole is not a price-taker in international capital markets - both reasonable descriptions of many developing countries experiencing resource (or aid) booms. We analyse the optimal policy actions for countries in this position and show that the usual permanent income hypothesis prescription of engineering a permanent increase in consumption financed by borrowing ahead of the windfall and then accumulating a Sovereign Wealth Fund (SWF) is not optimal. Heavily indebted countries with a small windfall should both increase current consumption and accumulate capital to accelerate their development. Only if the windfall is large relative to initial debt is it optimal to build a SWF. We study the intricate dynamic trade-offs faced when using the windfall to pay off debt and possibly accumulate a SWF, build public infrastructure and hand out citizen dividends. Finally, we show that a more sophisticated range of instruments (e.g., an asset holding subsidy) makes the trade-offs easier.
    Keywords: asset holding subsidy; credit constraints; debt management; developing economies; optimal fiscal policy; private investment; public infrastructure; risk premium on foreign debt; Sovereign Wealth Fund; windfall public revenues
    JEL: E60 F34 F35 F43 H21 H63 O11 Q33
    Date: 2008–09
  6. By: Alan B. Krueger (Princeton University and NBER)
    Abstract: The predictors of terrorism are unclear. This paper examines the effect of public opinion in one country toward another country on the number of terrorist attacks perpetrated by people or groups from the former country against targets in the latter country. Public opinion is measured by the percentage of people in Middle Eastern and North African countries who disapprove of the leadership of nine world powers. Count models for 143 pairs of countries are used to estimate the effect of public opinion on terrorist incidents, controlling for other relevant variables and origin country fixed effects. We find a greater incidence of international terrorism when people of one country disapprove of the leadership of another country.
    Date: 2009–01
  7. By: Farmanesh, Amir
    Abstract: This paper presents a spatial analysis on regional dimensions of poverty and economic development across provinces of Iran. It offers the first ever estimation made in developing countries using this strand of "New Economic Geography" (NEG) models and provides a comparison of the results between previously studied developed countries and Iran as a developing country. The goal of this study is to offer an analysis of the effects of agglomeration and dispersion economies on the patterns of regional economic development in Iran. It analyzes the linkages among adjacent provinces as well as effects of agglomeration and dispersion economies on the patterns of Iran's regional economic development through empirical estimation of two of the NEG models. First, it presents an estimation of a "Market Potential Function" (MPF), in which wages are associated with proximity to consumer markets. Second, the paper estimates an augmented MPF derived from the Krugman model of economic geography. The parameters in this model estimate the importance of transportation cost and economies of scale. The estimation results suggest that Iran showed generally good fit to both models and satisfied both MPF and Krugman model specifications. Compared to other similar studies in developed countries, Iran shows smaller returns to scale and consistently higher size of the effect of market potential on wages.
    Keywords: New Economic Geography; Spatial agglomeration; Market potential; Market structure; Increasing returns to scale; Transport costs; Iranian economy; Economic development in Iran; Income distribution in the provinces of Iran; Empirical evaluation
    JEL: O10 F12 O15 R12
    Date: 2009–01–02
  8. By: Gylfason, Thorvaldur
    Abstract: This paper describes some of the ways in which mineral rents and their management influence economic growth and other determinants of growth as well as some of the reasons why many mineral-rich countries have not managed very well to divert their resource rents to furthering economic and social development – that is, why natural capital tends to crowd out human, social, financial and real capital. The empirical evidence of these linkages is presented in two rounds. First, we allow World Bank data covering 164 countries in 1960-2000 to speak for themselves through a sequence of bilateral correlations that suggest an inverse relationship between natural resource dependence and growth via human capital. We then repeat the exercise for two aspects of social capital, corruption and democracy, suggesting an additional adverse effect of natural resource dependence via social capital on growth. In the second round, we test for the robustness of natural resource dependence as a determinant of long-run growth by estimating a series of growth regressions for the same 164 countries.
    Keywords: Economic growth; natural resources; social policy
    JEL: O11
    Date: 2008–11

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