Dynamics of Output Growth and Convergence in the Middle East and North African Countries: Heterogeneous Panel ARDL Approach

Abstract

The present study investigates the convergence process of per-worker output for a panel of 15 countries in the Middle East and North African (MENA) region over the period 1970–2016. Further, the study discusses the dynamic impact of various productive factors (physical capital, human capital and total factor productivity) on per-worker output. In order to estimate the long-run relationship, the paper employs various dynamic panel autoregressive distributed lag (ARDL) models. The econometric approach controls for cointegration, nonstationarity, heterogeneity and cross-sectional dependence in the variables and residuals. The results suggest the presence of cross-sectional dependence and mixed order of integration of the variables. The statistical results of Pedroni and Westerlund cointegration tests indicate that per-worker output, physical capital stock, human capital stock and total factor productivity tend to have a long-run relationship. The four-step methodology adopted in the present study consistently accepts the conditional β-convergence towards steady state of output per worker. Besides, the paper finds a positive impact of physical capital and total factor productivity on long-run economic growth.