Governance and Private Investment in the Middle East and North Africa

65 Pages Posted: 20 Apr 2016

See all articles by Ahmet Faruk Aysan

Ahmet Faruk Aysan

Bogazici University

Mustapha K. Nabli

World Bank

Marie-Ange Veganzones-Varoudakis

Cerdi-Université d'Auvergne - Clermont 1; National Center for Scientific Research (CNRS)

Date Written: June 1, 2006

Abstract

This paper addresses the issue of the low level of private investment in the Middle East and North Africa (MENA) region, with special emphasis on the role of governance. Based on the existing literature, the authors categorize what types of governance institutions are more detrimental to entrepreneurial investments. They then estimate a simultaneous model of private investment and governance quality where economic policies concurrently explain both variables. The empirical results show that governance plays a significant role in private investment decisions. This result is particularly true in the case of administrative quality in the form of control of corruption, bureaucratic quality, investment-friendly profile of administration, and law and order, as well as for political stability. Evidence in favor of public accountability seems, however, less robust. The estimations also stress that structural reforms - such as financial development and trade openness - and human development affect private investment decisions directly, and/or through their positive impact on governance. These findings bring new empirical evidence on the subject of private investment in the developing world and in MENA countries in particular.

Suggested Citation

Aysan, Ahmet Faruk and Nabli, Mustapha K. and Veganzones-Varoudakis, Marie-Ange, Governance and Private Investment in the Middle East and North Africa (June 1, 2006). World Bank Policy Research Working Paper No. 3934. Available at SSRN: https://ssrn.com/abstract=917505

Ahmet Faruk Aysan (Contact Author)

Bogazici University ( email )

Bebek, İstanbul 34342
Turkey

Mustapha K. Nabli

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Marie-Ange Veganzones-Varoudakis

Cerdi-Université d'Auvergne - Clermont 1 ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

National Center for Scientific Research (CNRS)

3, rue Michel-Ange
Paris cedex 16, 75794
France

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