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An empirical study of innovation-led economic diversification in MENA oil exporters

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Abstract

This paper aims, on the one hand, to investigate the impact of innovation on economic diversification in 11 oil-abundant MENA countries (Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, United Arab Emirates, and Yemen) over the period 1996–2019 using the Arellano-Bond difference GMM estimator and, on the other hand, to reveal how much the level of economic diversification will increase if MENA oil exporters will have innovation rates similar to that of a successful diversifier like Canada. The main findings emphasize the importance of innovation in promoting economic diversification in MENA oil-exporting countries; the level of innovation-led economic diversification increases at a greater pace in GCC countries than in their non-GCC counterparts. The results also show that governance, human development, domestic credit to private sector, and economic freedom positively and significantly affect economic diversification in MENA oil exporters, while oil rents negatively affect economic diversification in these countries. Moreover, the results confirm the effectiveness of the joint impact of governance index and oil rents in boosting economic diversification in oil-rich MENA countries. The results also reveal that the rate of improvement in economic diversification brought by replacing MENA oil exporters’ innovation rates with those of Canada is 1.77% (for every 1% increase in innovation). Based on that, one can say that increasing the rate of innovation in MENA oil-exporting countries does accelerate the pace of economic diversification.

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Notes

  1. Arezki 2018; Osakwe 2016; Klinger and Lederman 2006; Kim and Ferrer Morera 2017; Cieślik and Parteka 2021; Sæther et al. 2011; and Namazi and Mohammadi 2018.

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Acknowledgements

The author would like to express her sincere appreciation and thanks to the Editor Pr. Roula Inglesi-Lotz and anonymous referees for their helpful comments and suggestions that have greatly helped to improve the paper. The author also deeply and sincerely thanks Dr. Mohammed Zuheir Bakleh for his support and assistance.

Funding

This work was sponsored by the United Nations Economic and Social Commission for Western Asia (ESCWA) and Academic Network for Development Dialogue (ANDD) and has benefited from ESCWA’s financial and intellectual support.

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  1. University of Oran 2, Oran, Algeria

    Siham Matallah

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Table 8 Variable descriptions and data sources
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Matallah, S. An empirical study of innovation-led economic diversification in MENA oil exporters. Environ Sci Pollut Res 30, 22570–22589 (2023). https://doi.org/10.1007/s11356-022-23792-1

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