Sources of Growth Revisited: Evidence from Selected MENA Countries

This paper reconsiders the A versus K debate, namely, which factor is the leading contributor to economic growth? productivity gains (A) or factor accumulation (K). The growth accounting analysis is conducted for 10 Middle Eastern and North African (MENA) countries over the period 1960-98. The long-run share of capital in income is estimated using cointegration (country-specific) and panel data (region-specific) methods. We find that for most of the countries in our sample, the share of capital is much higher than the conventional share of 0.3-0.4. The growth accounting exercise conducted with the incorporation of human capital reveals that the contribution of productivity gains to growth is negligible and frequently even detrimental. Thus, we conclude that it is factor accumulation that drives the economic performance of the MENA economies.