Economic Growth and Investment in the Arab World

UPF Economics and Business Working Paper No. 683

26 Pages Posted: 9 Oct 2003

See all articles by Elsa Vila-Artadi

Elsa Vila-Artadi

Harvard University - Faculty of Arts and Sciences

Xavier Sala-i-Martin

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Date Written: May 2003

Abstract

This paper analyses the economic growth performance in the Arab world over the last forty years. The Arab world has managed to reduce poverty performance despite its relatively disappointing growth performance. We relate this poor performance of both oil and non-oil producers to investment. Contrary to widespread belief, we do not find evidence that low quantity of investment is the main of low growth. The decline in the investment rate followed rather than preceded the reduction in the aggregate growth rate. We conclude that the low quality of investment projects is the key determinant of growth. The excessive reliance on public investment, the low quality of financial institutions, the bad business environment (due to political and social instability and to excessive public intervention and overregulation) and the low quality of human capital are important determinants of systematically unproductive investment decisions and, thus, low economic growth.

Keywords: Economic Growth, Investment, the Arab World

JEL Classification: O0, O5

Suggested Citation

Vila-Artadi, Elsa and Sala-i-Martin, Xavier, Economic Growth and Investment in the Arab World (May 2003). UPF Economics and Business Working Paper No. 683. Available at SSRN: https://ssrn.com/abstract=430940 or http://dx.doi.org/10.2139/ssrn.430940

Elsa Vila-Artadi

Harvard University - Faculty of Arts and Sciences ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Xavier Sala-i-Martin (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
34 93 542 27 41 (Phone)
34 93 542 17 46 (Fax)

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