Sources of Algeria's economic growth, 1979–2019: Augmented growth accounting framework and growth regression method

Abstract

This paper examines the sources of economic growth in Algeria, studying the key drivers of their slow and weak economic performance, during the period of 1979–2019 from the perspective of the augmented growth accounting framework and the growth regression method. More specifically, the paper uses the augmented growth accounting framework to decompose the aggregate growth of an individual economy to determine the contribution of various inputs and the total factor productivity. The growth regression method, then, links the growth performance of a given country to a set of economic, social, and institutional variables to identify the deep drivers of its economic growth. Results of the accounting framework show that Algeria's growth performance has been weak and modest for decades. This is due, mainly, to labor growth with weak gain in capital accumulation and to sharp losses in the total factor productivity growth. Furthermore, results of the econometrics study stress the importance of the political, institutional, and economic variables and the macroeconomic stability as potential factors that may affect growth in Algeria. These findings highlight the need for policymakers to identify and to target these determinants to improve the long‐run economic growth in Algeria.