Deindustrialization and Growth in MENA Countries: A Focus on Tunisia

Monia Ghazali () and Rim Mouelhi ()
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Monia Ghazali: University of Carthage
Rim Mouelhi: University of Manouba

No 1733, Working Papers from Economic Research Forum

Abstract: This paper analyzes the pattern of deindustrialization in MENA countries to emphasize its main features and impacts on economic development. Using data from 1960 to 2018, we examine deindustrialization patterns and investigate their influence on overall growth over different periods. Since the contribution of services to growth has increased in recent decades, we also investigate the role and impact of services on growth. The main results suggest that MENA countries started to deindustrialize at a low level of GDP per capita, which is a sign of premature deindustrialization. When deindustrialization occurs at an earlier stage of development, countries don’t benefit from the manufacturing sector’s opportunities and externalities, such as technological penetration, skill development, openness, and technological transfers. The results also suggest that manufacturing weight exerts a positive effect on overall growth over the different considered periodsin Tunisia, thereby confirming itsrole as an engine of growth. However, manufacturing weight has shown a declining positive impact over time as it has been confined to low-technology, assembly-oriented, and outsourced operations characterized by a lack of sophistication. The results also show a persistent negative relationship between service weight and GDP per capita growth over the considered periods. In fact, the expansion of the services sector in recent decades was largely driven by lowproductivity services such as trade (largely in the informal sector), government services, and (to a lesser extent) modern, highly productive services.

Pages: 32
Date: 2024-09-20, Revised 2024-09-20
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