nep-ara New Economics Papers
on Arab World
Issue of 2012‒06‒05
nine papers chosen by
Quentin Wodon
World Bank

  1. The Formal/Informal Employment Earnings GAP: Evidence From Turkey By Aysýt Tansel; Elif Öznur Kan
  2. Regional Integration and Natural Resources: who benefits? Evidence from MENA By Céline Carrère; Julien Gourdon; Marcelo Olarreaga
  3. R&D Intensive Goods Trade and Competitiveness of Turkey in the European Union Market By Dilek Seymen; Baþak Gümüþtekin
  4. Mortgage contracts in Islamic home finance: Musharakah Mutanaqisah program vs. Zubair diminishing balance model By Hasan, Zubair
  5. The effects of oil shocks on government expenditures and government revenues nexus in Iran (as a developing oil-export based economy) By Dizaji, S.F.
  6. Islamic finance revisited: conceptual and analytical issues from the perspective of conventional economics By Singh, Ajit; Sheng, Andrew
  7. How wide is the Mediterranean? By Georg Zachmann; Mimi Tam; Lucia Granelli
  8. Les déterminants de la demande touristique : le cas du Maroc By Bouzahzah, Mohamed; El Menyari, Younesse
  9. Do Institutions and Culture Matter for Business Cycles? By Sumru Altug; Fabio Canova

  1. By: Aysýt Tansel (Middle East Technical University); Elif Öznur Kan (Cankaya University)
    Abstract: In this study, we examine the formal/informal sector earnings differentials in the Turkish labor market using detailed econometric methodologies and a novel panel data set drawn from the 2006-2009 Income and Living Conditions Survey (SILC). In particular, we test if there is evidence of traditional segmented labor markets theory which postulates that informal workers are typically subject to lower remuneration than similar workers in the formal sector. Estimation of standard Mincer earnings equations at the mean using OLS on a pooled sample of workers confirms the existence of an informal penalty, but also shows that almost half of this penalty can be explained by observable variables. Along wage/self-employment divide, our results are in line with the traditional theory that formal-salaried workers are paid significantly higher than their informal counterparts. Confirming the heterogeneity within informal employment, we find that self-employed are often subject to lower remuneration compared to those who are salaried. Moreover, using quantile regression estimations, we show that pay differentials are not uniform along the earnings distribution. More specifically, we find that informal penalty decreases with the earnings level, implying a heterogeneous informal sector with upper-tier jobs carrying a significant premium and lower-tier jobs being largely penalized. Finally, fixed effects estimation of the earnings gap depict that unobserved individual fixed effects when combined with controls for observable individual and employment characteristics explain the pay differentials between formal and informal employment entirely, thereby implying that formal/informal segmentation may not be a stylized fact of the Turkish labor market as previously thought.
    Date: 2012
  2. By: Céline Carrère; Julien Gourdon; Marcelo Olarreaga
    Abstract: This paper is built on Venables (2011) theoretical predictions which show that gains from regional integration are unevenly distributed between resource rich and poor countries. We explore the effects of different integration schemes in Middle East and North Africa. Results suggest that within Pan Arab Free Trade Agreement (PAFTA), there is significant trade creation for resource poor countries associated with regional integration, and no evidence of trade diversion. In resource rich countries, however, there is evidence of pure trade diversion in both resource-rich/labor-abundant countries and resource-rich/labor-importing countries. This underscores the idea that regional integration can help to spread benefits of unevenly distributed resource wealth among the region’s economies.
    Keywords: Regionalism, MENA, PAFTA
    JEL: F10 F11
    Date: 2012–05
  3. By: Dilek Seymen (Dokuz Eylül University); Baþak Gümüþtekin (Republic of Turkey Ministry of Economy)
    Abstract: This paper aims to measure trade competitiveness of Research and Development (R&D) intensive goods of Turkey in the European Union (EU) market, using different trade indices. Concentration Ratio (Michaely, 1958), Export-Import Commodity Composition Index (Muscatelli, 1991), Intra-Industry Trade Index (Grubel, Lloyd, 1971) and Sectoral-Bilateral Trade Intensity Ratios (Seymen, 2009) are calculated to analyze the technology composition of manufacturing goods trade between Turkey and the EU27. Revealed Comparative Advantage Index (Balassa, 1965), Marginal Intra-Industry Trade Index (Brulhart, 1994), and Sectoral-Bilateral Competitiveness Index (Seymen, 2009) are employed to gain insight about the bilateral competition between two parties. Thus, once the general situation related to the R&D intensive goods trade between Turkey and the EU is detected, it will be possible to draw some policy implications through a future study in the following phase, by identifying the value added structures, exterior input dependence and vertical-horizontal specialization levels of the goods revealed to have competitive advantage in this study.
    Keywords: R&D intensive goods trade, competitiveness, Turkey & EU Trade
    JEL: F10 F14 F15
    Date: 2012
  4. By: Hasan, Zubair
    Abstract: The present paper attempts two demonstrations. First, it shows that the Excel formula Islamic banks invariably use to determine the fixed installment payments in home financing amortization has explicit compounding of return. Once the installment is based on that formula, the subsequent claims that in implementation the charge becomes free of interest hardly remain tenable. Second, the paper proposes an alternative home finance model where the mortgage contract has several merits over the structure in common use i.e. the musharakah mutanaqisa program or the MMP. The proposed model is cheaper for the buyer while the margin of return for the banker is not reduced; thus, painting a win-win situation for both. It attracts no juristic doubts. Some bankers of international repute have already hailed the model as an innovative useful breakthrough in the area of Islamic finance. Finally, the model aligns better than others with the maqasid or the objectives of the Islamic law.
    Keywords: Home finance; conventional model; mortgages; MMP; ZDBM; Social view
    JEL: G21
    Date: 2012–06
  5. By: Dizaji, S.F.
    Abstract: The main purpose of this study is to investigate the dynamic relationship between government revenues and government expenditures in Iran as a developing oil export based economy. Moreover, I want to know how government expenditures and revenues respond to oil price (revenue) shocks. I use two different groups of the variables with two different time periods (quarterly and annually) to investigate the robustness and reliability of the results and to provide a more comprehensive base for comparison against different methodologies. For the first group of the variables (including oil price, oil revenues to GDP ratio, government total expenditures to GDP ratio and a dummy variable for capturing the effects of war with Iraq) I apply an SVAR model using annual data for the period 1970-2008. The results of the impulse response functions and variance decomposition analysis indicate that the causality is running from oil revenues to GDP ratio to government total expenditures to GDP ratio. Moreover the contribution of oil revenue shocks in explaining the government expenditures to GDP ratio is stronger than the contribution of oil price shocks. For the second group of the variables (oil revenues, government total revenues, government current expenditures, government capital expenditures, money supply and CPI) unrestricted VAR and VEC models have been applied using quarterly data for the period 1990:2-2009:1. The results of the impulse response functions and variance decompositions analysis for both VAR and VEC models indicate that the strong causality is running from government revenues to government expenditures (both current and capital) in Iranian economy while the evidence for the reverse causality is very weak. The results show that in the VEC model which the long-run behavior of endogenous variables is restricted to converge to their co-integration relationships, oil revenue shocks can affect the other macroeconomic variables more directly while in the VAR model this changes and works through the total revenues channel. Moreover the findings indicate that government revenues, government expenditures and money supply are important determinants of domestic price level in Iranian economy. Overall my results support the revenue-spending hypothesis for Iran. In this context Iran should enhance the effectiveness of fiscal policy by making budget expenditure less driven by revenue availability. This policy can help to avoid the costs and instability that variations in public spending generate mostly due to the fluctuations in oil revenues.
    Keywords: government expenditures;sanctions;Iran;government revenues;oil shocks;vector autoregression (VAR)
    Date: 2012–05–10
  6. By: Singh, Ajit; Sheng, Andrew
    Abstract: After a brief recent empirical sketch of Islamic finance, the paper turns to its main theoretical and conceptual purpose. It seeks to relate the concepts of Islamic and conventional finance, and to examine certain important questions which arise from the interaction between these systems. The paper is written from the perspective of conventional modern economics, as the authors are students of the latter. The paper discusses the main tenets of Islamic finance, as well as those of modern economics, including the implications of zero interest rates and those of Modigliani and Miller theorems. The most notable finding of this paper is that John Maynard Keynes’ analysis of employment, interest and money provides, inadvertently, the best rationale for some of the basic precepts of Islamic finance. The paper concludes that there is no inevitable conflict between the two systems and cooperation between them is eminently desirable and feasible.
    Keywords: Islamic Finance; Moral Hazard; Keynes; Zero Interest Rates; Usuary
    JEL: A13 E40 B41
    Date: 2011–11–14
  7. By: Georg Zachmann; Mimi Tam; Lucia Granelli
    Abstract: This policy contribution provides up-to-date evidence of the strong heterogeneity in the relationships between the five biggest EU economies with the Southern Mediterranean Countries (SMCs). Algeria, Morocco and Tunisia are still strongly tied to France, Italy and Spain, in terms of investments, financial flows and migration. This pattern is in line with the pattern of sizable French and Spanish official bilateral development assistance for Algeria, Morocco, and Tunisia. However, the economic connection of Germany, the UK and the US to the western SMCs is negligible. German and US bilateral development assistance is focused in Egypt, while the four other SMCs appear not to be priorities for non-Mediterranean EU countries. These differences cannot be explained by geographical distance alone. The unbalanced economic relationship of the SMCs with a small number of European countries risks exposing the SMCs to shocks in partner countries. Stronger economic ties also results in a higher degree of mutual political attention, as exemplified by bilateral development assistance that flows more strongly between countries with strong economic links. EU external policy is still largely driven by member statesâ?? interests. Hence building economic ties between the SMCs and non-traditional EU partners could both improve the SMCsâ?? external economic relationships, and make the SMCsâ?? political relationship with the EU more resilient. Bruegel gratefully acknowledges the support of the German Marshall Fund
    Date: 2012–05
  8. By: Bouzahzah, Mohamed; El Menyari, Younesse
    Abstract: Given the strong contribution of tourism in the Moroccan economy, we propose in this paper to analyze the determinants of an empirical point of view of international tourism demand addressed to Morocco. To do this, we estimated a vector error correction (VECM) for the period 2000 - 2009 with a quarterly frequency. The results of our estimates show that long-term arrivals at border posts (specifically from France, Spain and Germany) depend positively on income, the accommodation capacity in classified establishments, the exchange rate and negatively on the relative price. Furthermore, our estimates indicate that external shock (especially a terrorist act) will have a significantly negative impact on tourism demand.
    Keywords: Tourism demand; stationarity; cointegration; VECM
    JEL: D12 C22
    Date: 2012–05–25
  9. By: Sumru Altug; Fabio Canova
    Abstract: We examine the relationship between institutions, culture and cyclical fluctuations for a sample of 45 European, Middle Eastern and North African countries. Better governance is associated with shorter and less severe contractions and milder expansions. Certain cultural traits, such as lack of acceptance of power distance and individualism, are also linked business cycle features. Business cycle synchronization is tightly related to similarities in the institutional environment. Mediterranean countries conform to these general tendencies.
    Keywords: business cycles, institutions, culture, Mediterranean countries, synchronization
    JEL: C32 E32
    Date: 2012–04

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