Institutions, Natural Resources, and Economic Development in the MENA Countries

Abstract

ABSTRACT This study examines the effect of institutions and natural resource on per capita income in the Middle East and North Africa (MENA) region. The study answers the following questions: Do institutions and natural resources have a direct effect on growth in MENA countries? Are these effects significantly different from countries outside the MENA region? The analysis employs data from 1970 to 2010 for 158 countries and it uses six measures of institutions and six measures of natural resources. The data is analyzed by Ordinary Least Square, Fixed Effect, and System Generated method of moments. The results show a positive and direct effect of institutions and natural resources on per capita income in the MENA region. However, the effect of institutions is smaller for countries in the MENA region comparing with non-MENA countries. In contrast, the effect of natural resources is larger in MENA countries than non-MENA countries. Finally, the results show that institutions are not a proxy for natural resources for countries in the MENA region.