Corruption: A Brutal Enemy of Economic Diversification in MENA Oil Exporters

Siham Matallah ()
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Siham Matallah: University of Oran 2

No 1501, Working Papers from Economic Research Forum

Abstract: This paper aims, on the one hand, to investigate the impact of corruption on economic diversification in 11 oil-abundant Middle East and North Africa (MENA) countries and three successful diversifiers (Canada, Norway, and Malaysia) over the period 1996-2019. This is done using the Arellano-Bond difference Generalized Method of Moments (GMM) estimator that is effective in addressing the endogeneity problem. On the other hand, the paper aims to reveal how much the level of economic diversification will increase if MENA oil exporters have control of corruption scores similar to a successful diversifier like Canada. The main findings indicate that higher control of corruption leads to more diversification while higher oil rents lead to poor diversification in oil-exporting MENA countries. The joint impact of control of corruption and oil rents is effective in boosting economic diversification in MENA oil exporters. The results also reveal that the rate of improvement in diversification brought on by replacing MENA oil exporters’ control of corruption scores with those of Canada is 0.53 percent. Closing the control of corruption gap determines how quickly MENA oil exporters can promote economic diversification. Furthermore, non-Gulf Cooperation Council (GCC) countries need to exert much more effort compared to GCC countries in order to catch up with Canada’s control of corruption level. Most non-GCC countries must first address the serious problem of instability, since the more unstable the environment, the harder it is to control and handle corruption. Length: 30

Date: 2021-10-20, Revised 2021-10-20
New Economics Papers: this item is included in nep-ara, nep-ene, nep-int and nep-sea
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