Topics in Middle Eastern and North African Economies

Document Type

Article

Publication Date

9-1-2014

Abstract

The recent political uprising in the Middle East and North African (MENA) economies shines the light on evaluating the so-called structural reforms that are aimed at achieving economic freedom. This paper examines the impact of liberal policies on the economic performance of labor and capital productivity in MENA economies. Using nonlinear Panel Least Squares regression with regional dummies and period fixed effects (LSDV) for a sample of 18 MENA countries over the period 1995-2009, the study estimates the impact of different aspects of economic freedom on labor and capital productivity. The economic freedom measure encompass different areas, including freedom of fiscal, monetary, trade, investment, labor, financial, and freedom from corruption. The results of the study suggest a non-uniform impact of different areas of economic freedom on output per worker, capital intensity, human capital per worker, or total factor productivity. For instance, while trade freedom, fiscal freedom, monetary freedom, investment freedom, financial freedom, and freedom from corruption enhances output per worker through the increase in human capital per worker, it worsens it through a negative impact on capital intensity and total factor productivity. Furthermore, the study finds a significant reverse causality that runs from enhancing either output per worker or its three components on the economic freedom measure. While increasing output per worker or human capital per worker is reflected in an improvement in economic freedom measures, the opposite is found for the increase in capital intensity or total factor productivity. An important policy implication in this respect suggests that liberal economic policies in MENA countries might not be a pre-requisite for their enhanced future productivity.

Identifier

2334-282X

Journal Title

Topics in Middle Eastern and North African Economies

ISSN

2334-282X

Publisher

Middle East Economic Association and Loyola University Chicago

Volume

16

Comments

Presentation of the articles in the Topics in Middle Eastern and North African Economies was made possible by a limited license granted to Loyola University Chicago and Middle East Economics Association from the authors who have retained all copyrights in the articles. http://www.luc.edu/orgs/meea/volume16/meea16.htm

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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