The Indirect Effect of Democracy on Economic Growth in the MENA Region (1990–2015)

Shereen Nosier and Aya El-Karamani
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Shereen Nosier: Department of Economics, Faculty of Economic Studies & Political Science, Alexandria University, Smouha, Alexandria 21648, Egypt
Aya El-Karamani: Bibliotheca Alexandrina, Seragaldin Institute for Multidisciplinary Advanced Research (SIMAR), Chatby, Alexandria 21526, Egypt

Economies, 2018, vol. 6, issue 4, 1-24

Abstract: This paper examines the indirect effect of democracy on economic growth using a dataset of 17 MENA countries from 1990 to 2015. Democracy is assumed to affect growth through a series of channels: education, health, physical capital accumulation per labor, government consumption, and trade openness. A system of six simultaneous equations using 3SLS, is used to estimate the effect of democracy on growth through these channels. For further analysis, the countries are classified into groups according to the democratic status on the one side, and the level of income on the other. The results indicate that democracy enhances growth through its positive effect on health in all classifications of countries within the MENA region. However, the effect of democracy on growth through education and physical capital/labor is non-monotonic. Democracy hinders growth through government size and trade openness. Once all of these indirect effects are accounted for, the overall effect of democracy on growth is negative in less democratic countries and poor countries, but positive in more democratic countries and rich countries.

Keywords: economic growth; democracy; MENA; simultaneous equations (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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