Sources of Economic Growth in MENA Countries: Technological Progress, Physical or Human Capital Accumulations?

Abstract

Economic growth is an increase in the productive capacity of an economy. The productive capacity can be increased by an increase in factors of production, such as capital, labor, or the level of technology. Economic growth can also be defined briefly as an increase in the level of output that an economy can produce. From a supply-side view, the main sources of economic growth are expected to be from capital (both physical and human), accumulation and technological progress. The literature on economic growth examines whether the sources of economic growth stem mostly from technological progress, physical capital accumulation, or human capital accumulation. Besides, it is a fundamental debate about a simple question: Why does rapid growth occur in some countries when some others cannot achieve such a performance? Important literature analyzing the high and sustained economic growth of countries already exists. The main concern is to disentangle the contributions of capital accumulation and technological progress from this growth process. In light of this main concern, sources of growth should also be investigated for the countries in the Middle East and North Africa (MENA). Our study explores the sources of economic growth for the MENA countries and contributes to the debate over whether they stem from technological progress, physical capital accumulation, or human capital accumulation, and deliberates on the identifying assumption used in growth accounting theories.