Quality of Institutions and the Macro-Return to Education: The Case of Middle East and North Africa (MENA)

Abstract

The paper investigates the reasons for the established disappointing performance of the Arab education system as compared to the rest of the world. We focus on the role of the quality of informal institutions as measured by the World Value Survey (WVS) and formal institutions as measured by the International Country Risk Guide (ICRG) and the World Governance Indicators (WGI). We consider a Barro’s type production function where we condition the impact of education on growth by the quality of institutions. The resulting specification is estimated on a sample of 74 developed and developing countries over the period 1984–2017. The analysis shows that the region exhibits the lowest quality of institutions in many instances and that its performance in terms of growth is disappointing. Since our econometric investigation shows that the impact of education on growth increases with the quality of institutions, we conclude that a part of the explanation to the established disappointing performance of the Arab countries’ education system is to be found in the low quality of their institution. The conclusion provides some policy recommendations.