Pedroni Cointegration Test Research Articles

Analysis on Enhancing Private Sector Contribution in GDP through E-Government and Research in ASEAN Region

Private sector is important for a country as it contributes to the economy and GDP of a country to a greater extent. E-government is the use of latest technologies in the services provided by the government and other information management systems. Research and development is the process applied before introducing a new product or starting a new business. This study analyzes the influence of e-government adoption and R&D process on private sector contribution of GDP in ASEAN countries. Two control variables i.e. literacy rate and per capita income have also been used. The past studies have been discussed in literature review section. For analysis purpose, data about the concerned variables has been collected from ASEAN countries for 27 years. After application of several tests and methods i.e. IPS unit root test, Pedroni cointegration test and FMOLS coefficient estimation test, the two major hypotheses of this study are accepted along with the impact of a control variable, literacy rate. However, the impact of other control variable i.e. per capita income is rejected. This study has various implications in theoretical, practical and policy making context in order to increase the performance and GDP contribution by private sector.

An Empirical Analysis of the Environmental Kuznets Curve for River Water Pollution in Uttar Pradesh

This article attempts to test the environmental Kuznets curve (EKC) hypothesis for river water pollution for a panel dataset of 15 districts of Uttar Pradesh. There are sharp socio-economic and demographic variations within India; therefore, a regional study can give a better insight into the pollution income relationship of a specific region compared to a national study. Panel unit root tests, Pedroni cointegration test and fully modified ordinary least square (FMOLS) method have been employed to investigate EKC for two water pollutants—biochemcial oxygen demand (BOD) and total coliform (TC). Findings suggest that there is no evidence of an EKC for BOD, but results validate the existence of an EKC for TC. The Swachha Bharat Mission launched in 2014 aimed at eliminating open defecation and increasing toilet access in rural India can be a credited for the reduction in TC levels since 2014. The success of NAMAMI Gange so far seems to be localised to regions where political thrust has expedited the completion of projects.

Trade Openness and Environmental Degradation in Asean-5 Countries

This study investigates the relationship between trade openness and carbon dioxide (CO2) emissions among ASEAN-5 countries (Indonesia, Malaysia, Philippines, Singapore, and Thailand) during the period from 1995 to 2014. The variables used are trade openness, carbon dioxide emissions, gross domestic product, energy consumption, and foreign direct investment. Methodologies applied in this study are Panel Unit Root test, Pedroni Co-integration test, and Panel Granger Causality. The results of this study show there is a long-run relationship between the variables in ASEAN-5 countries. The results further show there is a bidirectional causal relationship between carbon dioxide, economic growth, and energy consumption in the short-run. The results of this study imply that ASEAN policy makers should focus on the implementation of carbon tariff and promote the energy efficiency usage. Keywords: Environmental Degradation, Trade Openness, Cointegration, Granger Causality.

The effects of deforestation and urbanization on sustainable growth in Asian countries.

This study aims to determine the effects of deforestation, economic growth, and urbanization on carbon dioxide (CO2) emissions levels in the South and Southeast Asian (SSEA) regions for the 1990-2014 period. The data was divided into five sub-panels. Three of them are income-based groups (namely low-, middle- and high-income panels), and the remaining two are South and Southeast Asian regions. The Pedroni cointegration test confirms a long-run relationship between deforestation, economic growth, urbanization, and CO2 emissions in the SSEA regions. Further, empirical results reveal the existence of a U-shaped relationship between CO2 emissions and economic growth for all panels (excepting low-income countries). This means that these countries can grow in a sustainable path, but they must be aware of long-term risks of this economic growth, as this sustainable path could be compromised when reaching the turning point of the "U". Moreover, our results suggest that deforestation and urbanization can aggravate environmental pollution in these regions and can further affect sustainable development in the long run. Besides, the most appropriate and cost-effective method to minimize CO2 emissions is found to be through the improvement of forest activities.

Human Capital and Per Capita Income Linkage in South Asia: A Heterogeneous Dynamic Panel Analysis

This study explores the linkage between human capital particularly life expectancy and literacy and GDP per capita in selected South Asian economies. The study uses annual panel data of Bangladesh, India, Nepal, Pakistan, and Sri Lanka for the period 2000–2016, published by the World Bank. It applies panel unit root test, Pedroni cointegration test, panel autoregressive distributed lagged (ARDL) bound test, and Dumitrescu-Hurlin panel causality test. The result from Pedroni cointegration test and panel ARDL bound test revealed that GDP per capita (LGDPC), life expectancy at birth (LEB), and adult literacy rate (ALR) have both long-run as well as short-run association. Dumitrescu-Hurlin panel causality test evidences bidirectional causality between LEB and LGDPC, ALR and LGDPC, and ALR and LEB. It means that life expectancy at birth causes GDP per capita, and increased per capita income causes life expectancy to rise through better health care. Adult literacy rate causes GDP per capita income positively; enhanced per capita income causes adult literacy rate to rise through spending on education. Lastly, literacy causes life expectancy through better job, higher earning, and healthier behavior, while life expectancy causes literacy through longer and better life, leading to more productivity and resultant incremental income enabling to spend more on education. Therefore, the policy makers of South Asian countries should promote further quality education and better health through human capital formation to achieve sustainable growth in per capita income.

The criticality of growth, urbanization, electricity and fossil fuel consumption to environment sustainability in Africa

While most African economies are primarily sandwiched with the seemingly unsurmountable task of attaining consistent economic growth and unhindered energy supply, the enormous threat posed by environmental degradation has further complicated the economic and environmental sustainability drive. In this context, the present study examines the effect of economic growth, urbanization, electricity consumption, fossil fuel energy consumption, and total natural resources rent on pollutant emissions in Africa over the period 1980–2014. By employing selected African countries, the current study relies on the Kao and Pedroni cointegration tests to cointegration analysis, the Pesaran's Panel Pooled Mean Group-Autoregressive distributive lag methodology (ARDL-PMG) for long run regression while Dumitrescu and Hurlin (2012) is employed for the detection of causality direction among the outlined variables. The study traces long run equilibrium relationships between examined indicators. The ARDL-PMG results suggest a statistical positive relationship between pollutant emissions and urbanization, electricity consumption and non-renewable energy consumption. Dumitrescu and Hurlin (2012) Granger causality test lends support to the long-run regression results. A bi-directional causality is observed between pollutant emissions, electricity consumption, economic growth and pollutant emissions while a unidirectional causality is apparent between total natural resources rent and pollutant emission. Based on these results, several policy implications for the African continent were suggested. (a) The need for a paradigm shift from fossil fuel sources to renewables is encouraged in the region (b) The need to embrace carbon storage and capturing techniques to decouple pollutant emissions from economic growth on the continent's growth trajectory. Further policy insights are elucidated.

Human capital formation and economic growth in South Asia: heterogeneous dynamic panel cointegration

This study attempts to examine the impact of human capital formation in terms of health and education expenditure on GDP growth of five South Asian economies. It uses annual panel data of Bangladesh, India, Nepal, Pakistan and Sri Lanka for the period 2000-2017, published by the World Bank. Panel unit root test, Pedroni cointegration test, panel auto regressive distributed lagged (ARDL) model estimation, and Granger causality test are applied. The result of panel ARDL model estimation reveals that growth of GDP, health expenditure and government education expenditure have long run association, but no short run correlation among the variables. The Granger causality test reveals the existence of a bidirectional causality between GDP growth rate and health expenditure, and a unidirectional causality from education expenditure to GDP growth. It means health expenditure causes GDP growth rate and the vice versa, and government education expenditure also causes GDP growth. Therefore, the policy makers should promote human capital formation through greater budget allocations towards health and education sector, and ensure effective use of allocated expenditures on education and health for achieving sustainable economic growth through human capital formation in South Asia.

Institutional Determinants Of Assessing Energy Efficiency Gaps In The National Economy

The article examines approaches to the analysis of factors that influence the difference between capacity and current energy production in the country, that is, the gap in energy efficiency in the economy. To investigate the main trends in the theory of energy efficiency and energy conservation, a bibliometric analysis was carried out (using VOSViewer v.1.6.10 toolkit), the object of which was 1428 scientific articles in publications indexed by the Scopus scientometric database. The analysis showed that in 2019, scientists published 1.5 times more work on the subject than in 2005, and revealed five clusters of scientists who investigated the problems of the connection between institutional determinants and lack of electricity in the country. The research hypothesis is to test the impact of institutional determinants on the energy efficiency gap in the economy. For the assessment of institutional determinants, such indicators of public administration effectiveness as: “rule of law”, “government efficiency”, “political stability and the absence of violence/terrorism”, “quality of regulatory activity” and “anti-corruption” have been used. The source of statistical information is the Worldwide Governance Indicator Global Eurojustice Reports and Eurostat data, the Pedroni co-integration test, and the least-squares method, the calculations were made using EViews 11. Objects of study are EU and Ukraine, the period for analysis – 2009-2018. The findings confirmed the statistically significant impact of institutional determinants on the energy efficiency gap in the economy: increasing government efficiency and political stability by 1 mind. units lead to a reduction in the energy efficiency gap of 0.47 and 0.54 dm. units in accordance. It has been empirically proven that improving the quality of regulatory activity and improving the rule of law in Ukraine is one mind. units cause energy efficiency gains of 0.34 and 0.41 dm. units in accordance. The results of the study can be used by state and local authorities to improve the country’s energy efficiency and energy efficiency systems. Keywords: energy balance, renewable energy sources, energy gap, corruption, quality of public administration, political stability, government efficiency, energy efficiency, energy conservation, institutional determinants.

Human capital formation and economic growth in South Asia: heterogeneous dynamic panel cointegration

This study attempts to examine the impact of human capital formation in terms of health and education expenditure on GDP growth of five South Asian economies. It uses annual panel data of Bangladesh, India, Nepal, Pakistan and Sri Lanka for the period 2000-2017, published by the World Bank. Panel unit root test, Pedroni cointegration test, panel auto regressive distributed lagged (ARDL) model estimation, and Granger causality test are applied. The result of panel ARDL model estimation reveals that growth of GDP, health expenditure and government education expenditure have long run association, but no short run correlation among the variables. The Granger causality test reveals the existence of a bidirectional causality between GDP growth rate and health expenditure, and a unidirectional causality from education expenditure to GDP growth. It means health expenditure causes GDP growth rate and the vice versa, and government education expenditure also causes GDP growth. Therefore, the policy makers should promote human capital formation through greater budget allocations towards health and education sector, and ensure effective use of allocated expenditures on education and health for achieving sustainable economic growth through human capital formation in South Asia.

Assessment of green investment impact on the energy efficiency gap of the national economy

The paper deals with the analysis of the green investment impact on the energy efficiency gap. The findings of the bibliometric analysis proved the increasing trend of the published documents on green investment and the energy efficiency gap. In the study, the author used Scopus Tools Analysis, Web of Science Results Analysis, and VOSviewer for providing the bibliometric analysis. In the paper the author checked the hypothesis as follows: cointegration exists between GDP, energy efficiency, green investment and share of renewable energy; green investment had a positive impact on the percentage of renewable energy; green investment had a positive effect on the countries energy efficiency and decreased the energy efficiency gap. The author used the unit root test for checking the stationarity of the selected variables. Pedroni panel cointegration test used for monitoring the cointegration between variables. Fully Modified Least Square model used for identifying the relationship between variables. The findings proved the stationarity of the data at the first level. It allowed providing the Pedroni cointegration test and long-run covariance test. Thus, the empirical results showed that increasing green investment leads to an increase in energy efficiency by 0.56 points, gross domestic product per capita – 0.18 points, renewable energy – 0.39 points. The increasing of renewable energy allowed increasing energy efficiency by 0.38 points, gross domestic product per capita – 0.19 points, green investment – 0.54 points. Besides, rising of the countries’ energy efficiency allowed growing of gross domestic product per capita by 0.27 points, green investment – 0.31 points, and declining of renewable energy by 1.14 points. If the increase of energy efficiency leads to a decrease in the energy efficiency gap the following could be concluded: increasing green investment leads to reducing of energy efficiency gap; increasing of renewable energy in the total energy consumption allowed declining the energy efficiency gap. In this case, in Ukraine, the mechanisms for improving the investment climate should be developed at the national level, considering the EU experience. Such activities allowed to attract additional green investment in renewable energy projects. Keywords: green investment, cointegration, correlation, green finance.

Evaluation of the relationship between energy consumption, economic growth, and CO2 emissions in China’ transport sector: the FMOLS and VECM approaches

Transport sustainability is an important foundation for achieving sustainable development in an economy. Particularly, environmental policies cannot overlook the growing importance in the transport sector as the economy expands. In this context, it is necessary to investigate the relationship between transport energy consumption (TEN), transport economic growth (TGDP), and transport CO2 emissions (TCE) to formulate the reasonable and specific transport policies. This paper investigated the long-run elasticity and causality between TEN, TGDP, and TCE for the case of China using the panel data covering 30 provincial regions during the period 2004–2016. Firstly, the stationary of each variable series was examined using the panel unit root test. Secondly, the cointegrating relationship in bivariate models was investigated by employing the panel Pedroni cointegration test. Thirdly, based on the fully modified ordinary least squares (FMOLS), the long-run elasticity coefficients in bivariate models were estimated. Finally, the panel Granger causality test based on the vector error correction model was utilized to determine whether the causality existed between the variables. The empirical results indicated that: (1) each variable was found to be integrated of order one, and the cointegrating relationship existed in all bivariate modes. (2) The panel FMOLS tests revealed that the long-run elasticity of TCE to TEN was almost equal to the long-run elasticity of TEN to TCE; the long-run elasticity of TCE to TGDP was significantly higher than the long-run elasticity of TGDP to TCE; and the long-run elasticity of TEN to TGDP was significantly higher than the long-run elasticity of TGDP to TEN. (3) Importantly, the bidirectional causal relationships existed between the TEN, TGDP, and TCE both in the short-run and in the long-run.

Investigating energy consumption and economic growth for BRICS-T countries

PurposeThe purpose of this paper is to explore the relationship between energy consumption and economic growth for Brazil, Russia, China, India, South Africa and Turkey (BRICS-T) countries. In this context, this study investigates energy consumption and real output in BRICS-T countries through panel cointegration.Design/methodology/approachThe data include energy consumption and real output for BRICS-T countries and period of 1990–2014. The variables are transformed into natural logarithm. To analyze these data, this study employed Pedroni cointegration test, the second-generation panel cointegration test, Westerlund and Edgerton (2008) test and FMOLS test.FindingsResults indicate that there is a bi-directional causality relationship between energy consumption and economic growth for BRICS-T countries. An increase in GDP leads to an increase in energy consumption and an increase in energy consumption leads to an increase in GDP.Research limitations/implicationsThis study used data that include the period of 1990–2014 for BRICS-T countries. So, further studies can use different periods of data or different countries.Originality/valueThis study provides important evidence that countries with strong growth performance need to follow bi-directional energy policies to increase both energy investments and ensure energy savings.

THE RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND RENEWABLE ENERGY PRODUCTION: EVIDENCE FROM BRAZIL, RUSSIA, INDIA, CHINA, SOUTH AFRICA AND TURKEY

This paper aims to investigate the relationship between foreign direct investment and renewable energy production in BRICS countries and Turkey. For this purpose, the annual data from 1996 to 2015 is examined using with Pedroni co-integration test and panel ARDL test. Test results indicate the existence of long run relationship between renewable energy production and foreign direct investments in BRICS countries and Turkey. Policy makers should adopt appropriate incentive policies to attract foreign direct investments into the renewable energy sector.Keywords: Foreign direct investment, renewable energy production, Panel ARDL methodJEL Classifications: F21, Q42, C23DOI: https://doi.org/10.32479/ijeep.7879

Dynamic impact of trade policy, economic growth, fertility rate, renewable and non-renewable energy consumption on ecological footprint in Europe

Climate change mitigation has become the central theme for many policy initiatives, as such, the European Union (EU) member countries are working assiduously to achieve the emission targets. To provide policy direction in achieving the emission targets, this study investigated the drivers essential to attaining the Sustainable Development Goals in regards to reducing environmental pollution in EU member countries. A balanced panel of 16-EU countries from 1997 to 2014 was estimated with Panel Pool Mean Group Autoregressive distributive lag (PMG-ARDL) model. The study traced the equilibrium relationship between ecological footprint, real gross domestic product, trade openness, fertility rate, renewable and non-renewable energy consumption — suggested by both Kao and Pedroni cointegration tests. The PMG-ARDL analysis confirmed the role of non-renewable energy consumption in depleting environmental quality while renewable energy consumption was found to improve environmental sustainability. Interestingly, the unexpected long-run fertility-ecological footprint nexus was connected with the divergent fertility rate information of the EU member countries. Although, country-specific policy approach is essential, however, such a framework should be compatible with the region's overall Sustainable Development Goals. The call for diversification of existing energy portfolios by either incorporating or enhancing renewable energy technologies is essential to sustain the current success strides of most member states. Thus, the EU needs to strengthen its commitments to achieving the emission targets by decarbonizing and sustaining its economic growth trajectory.

Exploring the Nexus among Environmental Pollution, Economic Growth Energy Use and Foreign Direct Investment in Sub Sahara Africa

This research seeks to enhance the current literature by exploring the nexus among environmental contamination, economic growth, energy use and foreign direct investment in 6 Selected Sub-Saharan-African-nations for a time of 34 years (1980-2014). By applying, panel unit root (CADF and CIPS, Cross-sectional independence test), panel cointegration (Pedroni and Kao cointegration test, Panel PP, Panel ADF), Hausman poolability test and an auto-regressive distributed lag procedure in view of the pooled mean group estimation (ARDL/PMG), experimental findings discloses that alluding to the related probability values, the null hypothesis of cross-sectional independence for all variables is rejected because they are not stationary at levels but rather stationary at their first difference. The variables are altogether integrated at the same order I(1). Findings revealed that there is a confirmation of a bi-directional causality between energy use and CO2 in the short-run as well as one-way causality running from energy use to CO2 in the long run. There is additionally a significant positive outcome and uni-directional causality from CO2 to foreign direct investment in the long-run yet no causal relationship in the short-run. An increase in energy use by 1% causes an increase in CO2 by 49%. An increase in economic growth by 1% causes an increment in CO2 by 16% and an increase in economic growth squared by 1% diminish CO2 by 46%. The positive and negative impact of economic growth and its square approve the EKC theory. To guarantee sustainable economic development Goal, more strict laws like sequestration ought to be worked out, use of sustainable power source ought to be stressed. GDP ought to be multiplied to diminish CO2 by the utilization of eco-technology for instance carbon capturing, to save lives and also to maintain a green environment.

Foreign direct investment and economic growth in South America

Purpose The purpose of this paper is to investigate the impact of foreign direct investment (FDI) on economic growth in countries in South America. Additionally, the study explores the causal linkage between FDI and growth in the region. Design/methodology/approach The study employs Pedroni’s cointegration test to examine the long-run relationship between FDI and economic growth in South America. Further, the study employs the vector error correction model (VECM) to examine the long-run relationship, and the causal nexus between FDI and economic growth in South America for the period 1980–2015. Findings The Pedroni cointegration test establishes a long-run relationship between FDI and economic growth in a panel of ten countries in South America. The long-run estimates of the study find a significant positive impact of FDI on economic growth in the region. The VECM results find a short-run bidirectional causality between FDI and economic growth. The error-term is negative and significant. This indicates the presence of long-run equilibrium relationship among the variables. Practical implications Countries in South America should adopt policies that would substantially enlarge FDI inflows to enhance their growth and development. Originality/value Numerous studies have examined the impact of FDI on economic growth in the context of Latin America. This study fills a gap in the existing literature by providing an empirical evidence that focuses on South America. This additional perspective could form the basis for the evaluation of the investment policies, and help policymakers to pursue FDI policies that would enhance growth and development in South America.

Does foreign direct investment impede environmental quality in Asian countries? A panel data analysis

AbstractThis study aims to investigate the validity of the pollution haven hypothesis for the global panel consisting of 29 countries (Bahrain, Israel, Jordan, Saudi Arabia, Turkey, United Arab Emirates, Oman, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan, China, Japan, Mongolia, Hong Kong, Korea rep, Bangladesh, India, Pakistan, Sri Lanka, Nepal, IR Iran, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam are taken as the sample of this study) with energy consumption, economic growth and trade openness as additional determinants of environmental degradation over the period 1994–2014. To make the panel data analysis more homogenous, we also investigate the validity of the PHH for a number of sub‐panels. These sub‐panels are constructed based on the sub‐regions of Asia. In this way, we end up with six Asian panels; namely, Global panel, West Asia, Central Asia, East Asia, South Asia and Southeast Asian panels. Based on the IPS and ADF chi‐square unit root test and Pedroni cointegration test results, all variables were found to be first difference stationary and cointegrated. On applying FMOLS, the long‐run results suggest the presence of the pollution haven hypothesis only in East Asian panel. In turn, foreign direct investment reduces environmental degradation, thus rejecting the validity of the pollution haven hypothesis (PHH) in the Southeast Asian panel which is found to be negatively linked to CO2 emissions. Moreover, energy consumption seems to be the main determinant of carbon emissions and GDP growth has a positive impact on it in all panels except West Asia. Lastly, East Asian countries have followed the Kyoto protocol in order to reduce their emissions level.

The Stability of Population and GDP Growth: A Comparative Analysis Among Different Nations in the World

The relationship between population growth and economic growth appeared differently in different countries. It became a debated issue for one country group from another where each country group classified by their income level. This article draws on data of forty countries that is twenty seven years long with each income group consists of ten countries. For panel data analysis the study introduces some econometric tests such as Unit root test, Country Pedroni (2004) cointegration test, Phillips-Peron cross section test, Johansen normalized cointegrating tests and Vector error correction test. The outcome states that in low income countries both variables are in equilibrium and reveals positive relationship. By one percent rise in the growth of population, in the long run, for high income and upper middle income countries the growth rate of GDP will drop by 1.19 percent and 0.044 percent respectively. Meanwhile, significant positive results come from lower middle income and low income countries which were the growth of GDP upswing by 0.44 percent and 0.42 percent respectively by the one percent increase in the growth of population. In high income countries, growth of GDP falls due to rise of the growth of population but the growth of population needs 1.47 year to reach to the equilibrium.

The Criticality of Growth, Urbanization, Electricity and Fossil Fuel Consumption to Environment Sustainability in Africa

While most African economies are primarily sandwiched with the seemingly unsurmountable task of attaining consistent economic growth and unhindered energy supply, the enormous threat posed by environmental degradation has further complicated the economic and environmental sustainability drive. In this context, the present study examines the effect of economic growth, urbanization, electricity consumption, fossil fuel energy consumption, and total natural resources rent on pollutant emissions in Africa over the period 1980-2014. By employing selected African countries, the current study relies on the Kao and Pedroni cointegration tests to cointegration analysis, the Pesaran’s Panel Pooled Mean Group-Autoregressive distributive lag methodology (ARDL-PMG) for long run regression while Dumitrescu and Hurlin (2012) is employed for the detection of causality direction among the outlined variables. The study traces long run equilibrium relationships b-etween examined indicators. The ARDL-PMG results suggest a statistical positive relationship between pollutant emissions and urbanization, electricity consumption and non-renewable energy consumption. Dumitrescu and Hurlin (2012) Granger causality test lends support to the long-run regression results. Bi-directional causality is observed between pollutant emissions, electricity consumption, economic growth and pollutant emissions while a unidirectional causality is apparent between total natural resources rent and pollutant emissions. Based on these results, several policy implications for the African continent were suggested. (a) The need for a paradigm shift from fossil fuel sources to renewables is encouraged in the region (b) The need to embrace carbon storage and capturing techniques to decouple pollutant emissions from economic growth on the continent’s growth trajectory. Further policy insights are elucidated.

The Economic and Non-Economic Determinants of Economic Growth in Oil-Exporting Arab Countries

This paper aims at exploring the main determinants of economic growth in Oil-Exporting Arab countries (OEAC) by shedding light on the most effective determinants. It is then wished that governments and policy makers would concentrate on and take them into consideration when they are designing and applying their public policies. The study used panel data for six OEAC over the period of 1998-2017. Some study variables were not stationary at level but they became stationary after taking the first difference for them. The result of applying panel Pedroni cointegration test revealed that the model was cointegrated. Therefore, FMOLS model was applied for estimation showing that gross fixed capital formation, labor force growth rate, economic freedom, rule of law, regulatory quality and government effectiveness have statistically significant positive impact on the economic growth of OEAC, while trade openness, control of corruption, political stability and voice and accountability have insignificant effects on their economic growth during the study period. Moreover, the Global Financial Crisis of 2008 with its slow recovery has a significant negative impact on the economic growth of such countries. Therefore, the study recommends OEACs’ governments to make “real” institutional reforms and adopt the appropriate polices that eliminate corruption and rent seeking behaviour and enhance the rule of law. They also need to improve the quality of education and to develop the skills and expertise of their labour force. In addition, they have to establish specialization in the production of goods in which they have comparative advantages and diversify their production and sources of national income, and not to depend only on exporting natural raw materials, which altogether eventually ensure resources are efficiently and effectively utilized in pursuit of their economic growth and social development.