Document Type : Research Paper
Authors
1 Ph.D. Candidate in Economics, Firuzkuh Islamic Azad University, Firuzkuh, Iran
2 Assistant Professor, Department of Economics, Firuzkuh Islamic Azad University, Firuzkuh, Iran
3 Associate Professor, Department of Economics, Firuzkuh Islamic Azad University, Firuzkuh, Iran
Abstract
Abstract
The total GDP of the MENA region is approximately $7 trillion (5.9% of the world economy), and its population is around 405 million (5.5% of the global population). This article aimed to evaluate the drivers of sustainability in 15 MENA countries from 1998 to 2019, examining different sub-periods. Evidence indicated that 14 countries made strides in catch-up growth between 1999 and 2019. The correlations were also calculated in four periods: 1980–1989, 1990–1999, 2000–2009, and 2010–2019. In the first period, only Egypt and Morocco showed progress in catching up. During the second period, nine countries experienced catch-up, while six lagged behind. The third period saw substantial improvements in the catch-up across most countries, with the exception of the UAE. In the fourth period, most countries continued on a catch-up trajectory. The analysis revealed that capital deepening played a crucial role in the performance of 11 countries. The human resource participation was positive in most countries but was negative in Iraq, Syria, and Saudi Arabia—although overall, its contribution was less significant than capital deepening. None of the countries demonstrated a positive contribution of productivity, and there was no evidence of productivity growth supporting performance improvements, leaving a considerable gap compared to the United States (as an ideal example). Furthermore, the catch-up patterns of large economies mirrored those of smaller economies.
Introduction
Among the various explanations for the surge in per capita income growth during the quarter-century following World War II, the most prominent hypothesis is that industrialized Western countries were able to produce a large amount of unused technology. Most of these technologies included methods of production and systems of industrial and commercial organization that were already established in the United States but had yet to be widely adopted in other Western countries. According to the hypothesis, the United States is viewed as a leader, while other nations are followers with the opportunity to catch up. Following this perspective, the loss of catch-up opportunities is often cited as a reason for lagging behind concerning the per capita income in the follower countries. The concept of catch-up and follow-up suggests a broader hypothesis stating that per capita income levels among countries tend to converge. However, catch-up and convergence are distinct concepts. To address the issue, the present study tried to answer the following questions: How has the gap in per capita income among MENA countries evolved over recent decades? And is the catch-up phenomenon evident in these nations? At first glance, distinguishing between these questions may seem challenging, as both involve a progress toward more equitable living standards among countries—often referred to as convergence. This article, therefore, sought to assess the convergence and catch-up in MENA countries, shedding light on the factors driving the catch-up.
Materials and Methods
The first section of the methodology was to clarify the distinction between convergence and catch-up. It specifically examined how differences in growth rates across countries influenced both the average GDP per capita relative to the United States and the Mean Log Deviation (MLD) over time. The MLD reveals how variations in average growth relative to the United States, along with the distribution of growth rates among countries, impact these two metrics.
To evaluate the catch-up performance over a given period, we defined the Catch-Up Index (CUI) as follows:
(1)
Where represents for the relative per capita income of country in year compared to the United States, which is defined as follows:
(2)
Note that and denote the per capita income of country and the United States in year , respectively, measured based on purchasing power parity (PPP) at constant prices. According to this definition, if the index is positive ( ), country has experienced catch-up; If the ( ) index is negative ( ), country has lagged behind. Moreover, if the index is zero ( ), country has neither caught up nor lagged behind. To analyze the factors driving the catch-up, the study employed the analytical framework of GDP growth developed by Jorgenson et al. (2005), as presented below:
3)
Thus, the CUI of a country can be divided into three components, representing its performance relative to the United States across three sources of per capita growth:
: The difference in the capital deepening rate.
: The difference in the labor force participation rate.
: The difference in total factor productivity (TFP).
Results and Discussion
In Figure 1, the left axis displays convergence, shown by the MLD of GDP per capita (blue line). The right axis displays catch-up, measured by the average GDP per capita of 15 Middle Eastern countries relative to that of the United States (red line). Note that GDP per capita is measured at constant 2017 prices based on purchasing power parity. The graph clearly demonstrates that convergence and catch-up are distinct concepts. A comparison between 1980 and 2019 revealed significant convergence, as the dispersion of per capita income across these countries in 2019 (MLD = 0.40) was significantly lower than in 1980 (MLD = 1.07). However, no catch-up was observed during this period, as the average per capita income of these countries relative to the United States declined from 1.12 in 1980 to 0.47 in 2019.
Figure 1. Convergence and Catch-Up in MENA Countries
Source: Research results
Refer to Table 1 for further clarity. Concerning the entire 40-year period as a whole, the results indicated both convergence and a relative lagging behind.
Table 1. Convergence and Catch-Up
1980-2019
2010-2019
2000-2009
1980-1999
Convergence
Slight convergence
Convergence
Convergence
Dispersion among countries
Lagging behind
Lagging behind
Catch-up
Lagging behind
Gaps with the USA
Source: Research results
Evidence suggests that capital deepening played a significant role in the performance of the 11 countries that experienced catch-up. In contrast, the impact of human resources appears to be less pronounced compared to that of capital deepening.
Table 2. Drivers of Economic Catch-Up (1980–2019)
Catch-up components (Share)
Catch-up components (amount)
Total factor productivity
Human resource participation
Capital deepening
Total factor productivity
Human resource participation
Capital deepening
Catch-up Index (CUI)
Country
-166.0
12.7
253.3
-6.14
0.47
9.36
3.69
Egypt
-122.3
46.5
175.8
-2.96
1.13
4.25
2.42
Lebanon
-108.0
28.4
179.6
-1.6
0.4
2.6
1.4
Iran
22.7
-2.6
79.9
0.26
-0.03
0.9
1.13
Iraq
-784.4
290.1
594.3
-7.96
2.95
6.03
1.02
Oman
-833.0
59.7
873.3
-69.1
0.49
7.24
0.83
Morocco
-702.7
196
606.7
-4.4
1.2
3.8
0.6
Jordan
-706.9
-94.0
900.9
-3.1
-0.41
3.95
0.44
Syria
-204.75
201.4
1946.1
-6.4
0.61
6.1
0.31
Tunisia
-2583.0
1072.0
2610.8
-4.57
1.37
3.33
0.13
Bahrain
-10541.3
3290.6
7350.7
-4.69
1.46
3.27
0.04
Qatar
5412.4
-3782.5
-1529-9
-2.63
1.84
0.74
-0.05
Kuwait
199.1
36.1
-135.2
-1.16
-0.21
0.79
-0.58
Saudi Arabia
178.9
-80.3
1.4
-3.49
1.57
-0.03
-1.95
Algeria
18.1
-5.6
87.5
-0.86
0.26
-4.14
-4.74
The Emirates
Source: Research results
Conclusion
The findings showed that MENA economies are heavily reliant on capital accumulation and deepening, with capital deepening serving as the primary driver of economic growth. This trend has continued for over 40 years and is likely to persist. There is no evidence to suggest that productivity growth has significantly contributed to the performance of MENA countries, leaving them substantially behind the United States in this respect. Additionally, the catch-up patterns seen in larger economies closely resemble those of smaller economies. To enhance economic stability and improve future prospects, it is essential for these countries to prioritize investment, increase the involvement of skilled labor (especially in knowledge-based industries), and gradually make a transition toward a knowledge-based economy. Producing more complex goods and fostering regional collaboration to reduce political tensions and economic risks are also crucial steps. By adopting these strategies, MENA countries can bolster their catch-up and pave the way for sustainable economic development in the future.
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