Global Advanced Research Journal of Management and Business Studies (ISSN: 2315-5086) Vol. 6(5) pp.

121-139 September, 2017

Available online http://garj.org/garjmbs/index.htm
Copyright © 2017 Global Advanced Research Journals

Full Length Research Paper

Determinants of Growth GDP per capita through Panel

Data Analysis in Selected Arab Countries
Dr. Jihad. Alfarajat and Dr. Mohammad. M. Alalaya
Al-Hussein Bin Talal University, College of administrative management and Economics, Ma’an, Jordan,
Al-Hussein Bin Talal University, College of administrative management and Economics, Ma’an, Jordan,
Corresponding author email : [email protected]
Accepted 13 September 2017

While empirical studies support the relevance of some factors for economic growth, some of them studies
the cross countries of OCED variability, others research the variation between countries variability, in both
growth patterns and potentially explanatory variables, this paper focuses on the selected Arab countries
represent three levels of Growth domestic product. The data quality has been utilized of data from many
sources and using Colman filter then ADF test to ensure stability of data, where the estimation approach
assume an even more crucial role as a novel econometric approach, that can be reconciled growth models
assumptions. The technique of this paper represents the difference in growth performance as well as the
evaluation of performance over time in each selected Arab country, this technique of panel data analysis
allows adjustment and convergence speeds to vary across countries in short term, and give a measure
signs ,while in long term in which can be imposing restrictions Results can be summarized as the levels of
rich or middle of income countries. Some of them depend on returns of oil productivity, while other
countries try to develop all sectors, such as financial market, tourism sector, communication sector,
industrial sector, and R&D as they could, but in this paper vary among countries. Our found indicates that
as well the accumulation of physical as well as human capital is the main drivers of economic growth.

Keywords: economic growth, determinant factors, models of economic growth, panel data, Arab countries, Jell
classification:

INTRODUCTION:

The suggested factors in this study are:

1- The human capital which can be considered as capita income, and government expense.
the 1st source of economic growth, and measured in 4- Political in stability based on a number of
terms of education level and health. coups/year, and assassination as measured by million
2- Geography. people per year.
3- Government policies. (Government saving, 5 - Inflation rate. Technical progress.
openness to the global economies, the growth of per The differences in income per capita across countries
122 Glo. Adv. Res. J. Manage. Bus. Stud.

in the Arab world are varied, also and output per worker, growth. The puzzle appears when one looks at a growth-
Such as between income per capita in Golf area and accounting approach that involves variables like the
Syria or Jordan or Somalia and other poor Countries. At Barro and Lee (1993) human capital stocks.
the top Arab world income distributions the Golf A useful analogy was suggested by But (Weitzman,
Countries becomes. Therefore this study interested in the 1996), understand the research process which is a
main driving factors which are driving economic growth in Childs chemistry set research proceeds,a various
selected Arab countries, and renewed the thinking of the elements are used, in this process, few combination are
obstacles' in front improving income per capita in these extremely valuable the Capital Accumulation,
countries. Most of these countries in technology Where (Robin Grier, 2005) studied the return to human
development are lagged behind how to improve and have and physical capital as lack of consistent data he used in
a progressive technology as well as institution and policy. his study a panel of countries in ISSA. Conclude
In particularly, the paper focus on the first fold on the (Angeldelafuente, 2011) , Summarize that investment
possible influence, also the accumulation of physical in education has a positive significant and sizable effect
capital which influenced of human capital, on productivity, growth, and the social returns to
macroeconomic and efficiency of financial market, investment countries .( Barro and Lee, 2010 ) tried to
structured policy settings of economy, and the trade improve the signal – to – noise ration in the schooling
policy, then other parts of the paper are focused on the series by exploiting new source of information and
factors which can be considered as a driving forces of introducing different corrections . They found that the
the Economic growth in these selected Counties. Many results concerning the impact of education on growth
researchers and economists and empirical studies improve considerably when these revised series are
support the relevance of these factors in their papers for used.
economic growth. (Euro S, and Vu, Thai, 2011 ) studied the East Asia
capital accumulation, their investigates aims to ensure of
the fast accumulation to make projections for the future.
A: Objectives of the study they estimate a " convergence " equation of physical
Capital per Capita, using a pooled cross – country.
The main purpose of this study is to achieve the following As recent studies, a pooled cross – Country time
specified goals: series data has used to explain both cross-country
1. To check the main impact of these variables differences in growth performance. Some of the authors
(factors) which are derived the economic growth in such as ( Andrea . B and Stefano . S, 2001 ) used
selected Arab countries. econometric technique allows short – term adjustments
2. To establish the linkage of relationships between and convergence speed to vary a cross countries , while
these factors and economic growth of these selected imposing restrictions only on long-run coefficients in their
Arab countries. study they have found that the two drivers of economic
3. To measure the degree of responsiveness of growth was the accumulation of physical as well as
these selected Arab countries economy's growth to human capital beyond R & D activities, trade openness,
changes which happen in population, trade, and fiscal sound of environment of macroeconomic, political
policy, also the inflation rate. stability, developed of financial markets and financial
policies, in addition to other factors which are operated
directly in economic growth .
B: Previous studies A decoupling between a macroeconomic policy
(money supply, budget deficit, taxation ), these affect the
(Steve bond, et al,2004) , found that the impact of income stability and prices with long – run of economic
investment in GDP has a large growth. many recent studies such as ( Acemoglu et al,
And the significant effect, the other found is in high 204 ) and ( Easterly, 2005 ) argued that the correlation
impact on the level of output per worker and extended between macroeconomic volatility and growth variables,
into its long-run growth rate. The pooled annual data for a become insignificant once on controls for the institution.
large sample of countries have been used in their paper. ( Philippe. A and Loana, M, 2007 ) find in their study that
They are robust to controlling for unobserved country an increase in financial development, a decrease in
specific effects; while the consistent heterogeneity is openness to trades, and the adoption of an inflation
viewed due to differences, this according to different targeting. regime move countries towards a more counter
policies and institution, and the incentives that create in cyclical budget deficit and the more counter cyclical
their paper can have a tremendous impact on economic budget deficit has a positive and significant effect on
growth.Where ( Pritcheh, 1996 ), ( Ben habit and economic growth.
Spiegel, 1994 ) and Judson (1996 ). These papers (I . m. F report, 2015 ) , In their paper they have used
studied with different methods a puzzle involving the cross – section data to reference historical data of 100
relationship between human capital and economic countries for the period 1970 – 1998 panel data .( Eric .
 Jihad and Mohammad, 123

M Ergen, Jonathan. Skimmer, 1992 ), They have used public expenditure on an economy in Nigeria, for the
115 countries cross – sectional data for 15 years upon period 1970 – 2009. The method of analysis was the OIS
which is presumably long enough to capture out the multiple regression, in order to specify the causal
effects of short – term fluctuations in government relationship between government expenditure and
spending and taxes on growth rates . Results of the economic growth. Results of the analysis show that the
paper are; a positive effect of government spending on capital and current expenditure on economic services
private productivity, inter temporal tax distortions and a had the insignificant negative effect on economic growth
transition path from the equilibrium growth path. and a positive effect on economic growth by capital
While ( Ben Anaya et al . 2014 ); they have used expenditure on transfers.( Suliman, 2009 ) observes that
Generalized methods ( GMM) methods. analyzing a the size of government and its impact on economic
dynamic panel of data period for 1980 – 2007, to check growth has a emerged as a major financial management
the long run relationship between fiscal and economic issue facing economies in transition. And observe that
growth, the relationship between the per-capita gross the fiscal volatility of the post period – 1979.
domestic and categories of budgetary revenues reveals a The effect of trade policy on income and growth is
link a positive causality between economic growth and more Count over side, lowering trade barriers is likely to
fiscal revenues, then the tax effect is too difficult to isolate foster international trade by reducing transaction costs,
empirically. which in turn can enhance economic growth rates, the
(CristinaChechenta and Philip Rother, 2010 ) , Their data of their paper consists of 81 developing countries
results provide additional arguments for debt reduction to and 21 of developed or advanced countries, covering the
support longer – term economic growth prospects . and period of 1971 – 2007 . Used a panel data set, and their
other results such as the channel government debt ( level main model core of Solow model, following the
) associated with per Capita GDP Growth rate, the specification of Mankiw et al. 1992 ), and a dynamic
channels are private saving, public investment, and total panel estimation depends crucially on the specification of
factor productivity trade. The empirical evidence for a causal linkage
( TFP ). While ( Romer, 2007 ) by using narrative records between trade and economic growth is ambiguous .a
assessed an impact of taxation on economic movements positive and highly significant impact of trade on
to explore magnitude, timing, and principal incentive for economic growth has the in the steady equilibrium state.
all chief post – war tax policy activities, the result of the (MarieDawnal, Selin, Ozyurt, 2011), the impact of
study that found tax increase to be highly counter- trade openness on the economic growth of Brazilian
dictionary, and results were more significant. states, their study covering the period 199 – 2002. A
(Peng Sun, et al. 2010 ) they used a data of 6 years Brazilian step growth rates are modeled as a dependant
balanced panel data from 2002 to 2007, with total on international trade flows, and many control variables
number of observations 186, the regional GDP, Capital are used in the study such as human capital, private and
stock, and trade volume are normalized to the base year public physical capital, growth rate of labor initial income
( 2002 ) by CPI and PPI index , they have marked their level, and a number of interaction terms with trade
paper with the idea that the Chinese international trade openness. They have used the GMM estimator. Results
has experienced rapid expansion together with its are declared that the states that depend on agriculture
dramatic economic growth, which has made the country activities are well endowed in human capital less than
to target the world assist market . results in both industrialized states.
econometric and nonparametric approaches are applied (Mesut. S and Ahmet.I . 2015) investigated the effect
to test the data of 31 provinces of China, a stochastic of globalization on international trade, they have
frontier production function were estimated, also the concluded in their paper that the globalization
province specific determinants of inefficiency in trade phenomenon is not new; it's clear reasonably expanded
identified and Divisia index were calculated for each its domain after the 1980s. The economies outcomes of
province. Results drown with that global trade helps this process get increasing interdependence of world
China reap the statistic and dynamic benefits, and both economies forth data analysis and scale of cross-border
international trade volume, and trade structure towards trade of commodities and services increased remarkably.
high-tech exports with a positive effect of trade toward ( KaragozKadir and Kargoz Murat, 2009) their study
economic growth. covering the period of 16 years, their study conduct using
( Mathias. B and Jens. K, 2012 ) in their paper a gravity model of panel data, using the gravitational
investigated the main idea that the less developed factor affected bilateral trade in BSEC. The result implied
countries trade patterns and changes in those patterns that the economic size and population of the importer
over time are closely associated with the transfer of countries have a positive impact on trade volume, where
technology, and the openness trade can migrate the the distance between them works on opposite way.
certain products by advanced countries to less developed (ArisAisen and Fransisco J. Velga, 2011) , have
countries. argued in their paper about the effects of political
(Nworji, I, Desmond, et al, 2012 ) , studied the effect of instability on economic growth using the system – GMM
124 Glo. Adv. Res. J. Manage. Bus. Stud.

estimator for linear dynamic panel data models . on a negative impact on the economic growth.
sample covering up to 169 countries . and a period of Nell, (2000) examined the issue of inflation was the
1960 – 2004. MarieDawnal, find that the higher point of detriment to economic growth by using Vector Auto
political instability flows, with lower growth rates of GDP Regressive (VAR) technique. Data for the period from
per Capita and their growth argued that the adverse 1960-1999 was used and his empirical, results suggested
effects growth by lowering the rates of productivity growth that inflation within the single-digit zone may be beneficial
by lowering the rates of productivity growth while to economic growth, while inflation in the double digit
democracy may have a small causal effect .( zone tends to limit economic growt
Takis.S.Pappas and Eoin O MALLEY, 2014), They have Sergii, (2009) found that growth - inflation interaction
referred to a phenomenon as political Buddhism . And was strictly concave with some threshold level of inflation.
they have argued that their holding extreme values on the Inflation threshold level is estimated by using a non-linear
dependent variable and they suggest that government least squares technique, and inference made by applying
should be a prior variable in the model in which economic a bootstrap approach. The main findings were that
deprivation has an intervening role. inflation rate above 8 percent tends to slow down
The political process suggests that protest and violence economic growth while below 8 percent promotes
against the state have deep structural form, which is economic growth. Espinoza et al. (2010) examined
tipped by exogenous shock, such as fiscal crisis, leading threshold effect of inflation on GDP Growth by using a
to violence and ultimately possible revolution such as panel data of 165 countries including Oil Exporting
what happened in Egypt 2011. Countries and Azerbaijan over the period of 1960-2007.
(AftabHussain et al., 2016) have studied the effect of Their study found that for all country groups' threshold
political unrest on the economics of Pakistan.ArieAisen level of inflation for GDP growth was about 10 percent
and Francisco Jose Veiga (2011), " How does political (with the exclusion of industrialized countries where
instability affect economic growth ?. And it is volatility threshold level was much lower). Estimated results
over last 22 years .they have used terrorism, election, suggested that inflation from higher than 13 percent
regime, and strikes as political instability proxies. An Arch decreases real non-oil GDP by 207 percent per year.
and Garcia (1.1) has been used in their study, they have Umaru and Zubairu, (2012) suggested that all the
among the proxies that only terrorism has significant variables in the unit root model were stationary and the
negative effects on the mean equation the other findings, results of causality revealed that GDP caused inflation
that overall results imply that the political instability has and not inflation causing GDP. The results also revealed
negative significant effects on economic growth.Terrorism that inflation possessed a positive impact on economic
is one of the major cause of slow down the economic growth through encouraging productivity and output level
activities and economic growth it negatively affected ( and on an evolution of total factor productivity.
Range and Pradhan, 2014). Where ( Ali Hashim and Hasanov, (2010) employed an annual data set on the
Hassan, 2013 ) investigated both economic as well as growth rate of real GDP, Consumer Price Index Inflation
political factors to predict the reasons for the volatile and growth rate of real Gross Fixed Capital Formation to
economic growth and low investment in Pakistan, the investigate whether there was any threshold effect of
proxies are used in their study are corruption, political inflation on economic growth over the period of 2001-
instability, frequent regime changes, Energy crises and 2009. Estimated threshold model indicated that there was
political conflicts among parties. a nonlinear relationship between inflation and economic
(Okafor, 2015) suggested that there is a positive effect growth in the Azerbaijani economy and threshold level of
of political instability on economic growth, he used good inflation for GDP growth was 13 percent. Inflation rate
governance, social unrest, corruption, political instability lower than 13 percent reflected the statistically significant
analyzed by GMM estimator. Where ( Mohammad- M. positive effect on GDP growth but this positive
Alalaya, et al, 2016) studied the factors affected tourism, relationship became negative when inflation exceeded 13
one of these proxies is political instability, they found that percent. He added that economic growth was expected to
the political instability has a negative significant effect in decline by about 3 percent when inflation increased
growth tourism, which in general one of the component of above the 13 percent threshold. ; Odusola and Akinlo
GDP. (2001) and Essien (2005), opined that exchange rate
(Faraji.K and Kenai. M. A, 2013) Studied the impact devaluation or depreciation includes higher import prices,
of inflation of economic growth, their case study in external shocks and accentuates inflationary
Tanzania, the data series covering the period of (1990 – expectations.
2011), correlation coefficients and co integrating There are three major types of inflation according to
technique were used to established the linkage neo-Keynesians. The first is the demand-pull inflation,
relationship between inflation and economic growth and which occurs when aggregate demand is in excess of
coefficients of elasticity were applied to measure the available supply (capacity). This phenomenon is also
degree of responsiveness of change in GDP to changes known as the Phillips curve inflation. The output gap can
in price levels. Results suggest that inflation rates have a result from an increase in government purchases,
 Jihad and Mohammad, 125

increase in foreign price level, or increase in money According to this school, the relationship between
supply. The Phillips Curve Two major goals of interest to changes in the rates, of money and prices is non-
economic policy makers are low inflation and low proportional and indirect, through the rate of interest. The
unemployment, but quite often, these goals conflict. The strength of the Keynesian theory is its integration of
adoption of monetary and/or fiscal policy moves the monetary theory on the one hand and the theory of
economy along the short-run aggregate supply curve to a output and employment through the economy. of interest
point of higher price level. As higher output is recorded, on the other hand. Thus, when the quantity of money
this is followed by lower unemployment, as firms need increased, the rate of interest falls, leading to an increase
more workers when they produce more and vice-versa. in the volume of investment and aggregate demand,
This trade-off between inflation and unemployment is thereby raising output and employment. In other words,
described as the Phillips curve. This was an empirical the Keynesians see a link between the real and the
discovery by Phillips (1958), which showed an inverse monetary sectors of the economy and economic
relationship between wage and unemployment rates, phenomenon that describes equilibrium in the goods and
using United Kingdom data plotted over the period 1862- money market (IS-LM). Equally important about the
1957. The discovery is strengthened by the fact that Keynesian theory is that they examined the relationship
movement in the money wages could be explained by the between the quantity of money and prices both under
level and changes of unemployment. An argument in unemployment and full employment situations.
favor of the Phillips curve is the extension that According, so long as there is unemployment, output and
establishes a relationship between prices and employment will change in the same proportion as the
unemployment. This rests on the assumption that wages quantity of money, but there will be no change in prices.
and prices move in the same direction. The strength of At full employment, however, changes in the quantity of
the Phillips curve is that it captures an economically money will induce a proportional change in price. Olofin
important and statistically reliable empirical relationship (2001) thus, this approach has the virtue of emphasizing
between inflation and unemployment. The Monetarists that the objectives of full employment and price stability
The monetarists, following from the Quantity Theory of may be inherently irreconcilable. The Neo-Keynesian The
Money (QTM), have propounded that the quantity of neo-Keynesian theoretical exposition combines both
money is the main determinant of the price level, or the aggregate demand and aggregate supply. It assumes a
value of money, such that any change in the quantity of Keynesian view on the short-run and a classical view in
money produces an exactly direct and proportionate the long-run. The simplistic approach is to consider
change in the price level. The TQM is traceable to Irving changes in public expenditure or the nominal money
Fisher‟s famous equation of exchange: MV=PQ, where M supply and assume that expected inflation is zero. As a
stands for the stock of money; V: for velocity of circulation result, aggregate demand increases with real money
of money; Q: is the volume of transactions which take balances and, therefore, decreases with the price level.
place within the given period; while P: stands for the The neo-Keynesian theory focuses on productivity,
general price level in the economy. The Special Issue on because, declining productivity signals diminishing
Social Science Research © Centre for Promoting Ideas, returns to scale and, consequently, induce inflationary
USA www.ijbssnet.com 186 Transforming the equation pressures, resulting mainly from over-heating of the
by substituting Y (total amount of goods and services economy and widening output gap.
exchanged for money) for Q, the equation of exchange
becomes MV=PY. The introduction of Y: provides the
linkage between the monetary and the real side of the Theoretical approach:
economy. In this framework, however, P, V, and Y are
endogenously determined within the system. The variable A: Education as a driving force of economic growth:
M is the policy variable, which is exogenously determined
by the monetary authorities. The Monetarists emphasize Since 1980's, much of the attention of macro economist
that any change in the quantity of money affects only the has focused on long-term effects of education on growth,
price level or the lead side of the economy, with the real this emphasis reflects the recognition that the difference
sector of the economy totally insulated. This indicates between prosperity and poverty for a country depends on
that changes in the supply of money do not affect the real how fast it grows over the long term. Recent endogenous
output of goods and services, but their values or the growth models are useful for understanding why
prices at which they are exchanged only. An essential advanced economies can continue to grow through the
feature of the monetarist's model is its focus on the long- long term despite the effect of diminishing returns in the
run supply-side properties of the economy as opposed to accumulation of physical and human capital. Many
short-run dynamics. researchers argued that the quality of schooling is more
(Dornbush, et al, 1996). The Keynesian opposed the important than the quantity, measured, for example by
monetarist's view of the direct and proportional years of attainments.
relationship between the quantity of money and prices.
126 Glo. Adv. Res. J. Manage. Bus. Stud.

Table 1. Total government outlays and “ productive government spending as a share of total spending as
a share of total spending, 2000,2005, 2010, 2016 percentage

Education (A) RGD (B)

2000 2005 2010 2016 2000 2005 2010 2016
Egypt 5.1 5.7 5.1 6.3 1.31 1.29 1.42 1.28
Tunisia 4.2 4.9 5.2 6 1.41 1.26 1.18 1.32
Jordan 3.9 4.1 4.3 4.6 0.8 0.75 0.83 0.86
Qatar 9.4 9.7 10.2 12.9 1.1 1.21 1.27 1.38

Transportations and Communications (C)

2000 2005 2010 2016
Egypt 3.15 3.29 4.21 4.15
Tunisia 5.7 6.7 6.8 7.2
Jordan 3.29 4.81 5.1 5.4
Qatar 9.1 9.8 10.2 11.3

Table 2. The geographic distribution of the world population has changed over time.

1650 1800 1933 1985 2010 2030

World population 545 906 2057 5716 6909
Europe 18.3 20.7 25.2 12.7 10.6
North America 0.2 0.7 6.7 5.1 5.1
Oceania 0.4 0.2 0.5 0.5 0.5 0.8
Latin America 2.2 2.1 6.1 8.4 8.5 9.2
Africa 18.3 9.9 7 12.8 15 17.2
Asia 60.6 66.4 60.8 60.3

Many researchers discussed the available cross-country percent now a day. In the developing world, population
aggregate measures of quality such (Barro and Lee, growth remained low throughout the 19th century. Rose
2000) and (Hanushek and Kimi, 1999) their finds can be sharply after 1950 to peat at 2% in 1970, and has since
calculated as that the indicators of quality of schooling gradually decreased to about 1.3% now a day.
can be the matter more than years of attainment of Table ( 1): Total government outlays and “ productive
subsequent economic growth. and they have used the government spending as a share of total spending as a
science score such as the mathematics examination, share of total spending, 2000,2005, 2010, 2016
which has significant positive effects on economic percentage.
growth, and the estimated effects of economic growth The potential w/o of the structure of financing and
and the estimated effect parity over the school attainment expenditure is considered by looking separately at direct
variable now simply would increase the growth rate on and indirect taxes which are imposed by the government,
impact by only 0.2 percent per year. But in another hand, but as in the period of 2000 to 2016 increased. In this
many macroeconomic studies have found that the test context, the human capital variable discussed above may
scores may just proxy for another characteristic of be taken to present the past and present governments'
students such as family income and parent's education. efforts in financing education. The realistic scenarios
Therefore, it is too difficult to tell that there is a positive predict stabilization by 2050 at 10 billion. The population
relationship between test scores and student outcomes, dynamics model can be as:
such as future earning, reflects the quality of education of Pt+1=Pt+ Bt – Dt + Mt …………………………(1)
these characteristics. where: Pt: population at time t. Bt: number of births,
hence the birth rate: bt = Bt /Pt
Dt : number of deaths, hence the mortality rate:it = Dt/Pt,
B: Population growth and the demography transition: Mt = net migrations, hence the migration rate: mt = Mt /
Pt. The population growth rate:
The population has been growing very slowly for Pt+1 / Pt = 1+nt ………………………..(2)
millennia, at yearly growth rates lower than 1% until where it = bt – it + mt
1700, the population growth started to rise in Western
Europe and it is offshoots in the 18th and 19th centuries. In the table (2 ), demographic growth exceeds the
Peaking around 1850 at 1% and then decreased to 0.5 capacity of agriculture to sustain a growing population
 Jihad and Mohammad, 127

dependent leads to demo-economic cycles with factors make it grow. Alfred Marshal (1890) has
adjustment through famine, epidermises, wars, also we introduced the famous fiction of the stationary state … to
can notes that any increase in income is absorbed contrast the results Marshal thought to get gradually
through higher population growth. The scientist's ideas in closer to the actual conditions of life. The same idea in
this field can be demonstrated as: Gustav Cassel’s (1932) in his book “the theory of social
• PualEhrlich :((1968) the population bomb ), it economy “. The model of exogenous growth delineated
predicts that within a decade, over population will cause by Cassel can be considered the proximate starting point
repeated famines and resurgence of diseases, eventually of the neoclassical growth theory.
killing one fifth of the of the world's population. but this Cassel (1932. Pp125-3) assumed that there are two
not happen. primary factors of production, the quantities of these
• Political Economy of Institutions: resources, and the amounts of services provided by them
We should think about why institutions and policies differ are taken to be in a given supply. General equilibrium is
across countries driving factors to stand why some characterized by the quality of supply and demand for
countries are poor and some are rich, an explanation of each factor service and for each good produced.
differences in income across countries and over time in Generally, Cassel arrived at basically to the same results
terms of institutional differences is also incomplete. of Marshall.
• Lester Brown: ( Beyond Malthus, 1999) over
population will constrain and even reverse economic
progress. C.2.2: The neoclassical models:

C.2.2.1: The models (1950s and early 1960s) differ

C: Literature review from the: growth version of the Walras - Cassel model, in
many respects:
C.1: Fiscal policy and economic growth : A - Their models are analyzed with one produced good
which can be considered as a consumption good and as
In the medium term, many authors demonstrate that a capital good, therefore their models are macro-models.
fiscal policy settings that it relevant still affected output B - The primary factor is reduced in their model to one
and economic growth of a country as well as over the active factor of production such as (Solow, 1963, Swan
business cycle, where the government deficit, finance 1956), how are reduced the factor to homogeneous labor,
consumption or transfer a traditional argument in order to or two as land factor and homogeneous labor, such as
reduce the out effects on private sector investment. also, (Swan 1956, Meade 1961)
it seems as being at odds with the monetary policy the C - Labor, capital are produced all-purpose goods.
researchers in their papers note that the credit can be D - The technical alternative is given by a macro
leading to risk premier in interested rates also pressures economic, production function which has specified
on exchange rates, with regressions on capital properties as homogeneous of the first degree. With a
accumulation on the country economy. The necessary positive and decreasing marginal productivities, with
taxes which imposed to finance government spending respect to each factor of production. The model of one
could all distort incentives, finally, we can summarize that factor is a steady state equilibrium as:
there is may be side effects of government intervention Sf(k) = gk, …………………….( 3 )
as well as specific effects stemming from the financing Where: f(k) is the production function/unit of labor or per
and composition of public expenditure. The public capita.
expenditure in the selected Arab countries focuses on k represents the capital/labor ratio, S: is the marginal
unproductive activities, thus the negative effects may propensity to save, and g: is the steady state growth rate
more evident that the financing relies heavily direct on of capital. These models can be described as models of
taxes upon in all of them. exogenous growth, also they can describe as models of
The financial systems can provide the economic growth endogenous profitability when:
for capital accumulation by helping the diffusion of new r = f(k).R the rate of profit, which is a function equal to
technologies. The diversifications may prompt to use the marginal productivity of capital.
holds to save less if income effects dominate substitution D: The other new models of endogenous growth:
effects.
1- constant returns to capital.In this mode set aside all
C.2: Models of economic growth not-accumulate factors of production distributions, the
C.2.1: Exogenous models: labor, and level, the simple version of this class is the so-
A1: Alfred Marshal and Gustav Cassel: called (Ak model).This model assumes that there is a
linear relationship between total output Q and k which are
The idea of economic growth in their models, that system consisting of the same commodity:
of growing is exclusive because there is some exogenous Q = Ak ……………………… ………(4 )Arab world: 1/A
128 Glo. Adv. Res. J. Manage. Bus. Stud.

Figure 1. The Smithian- Marxian model of growth.

is the amount of that commodity required to produce one Where N: times the fraction of time spent working, u
unit. The rate of return on capital r: can be as: times h which gives labor input in the efficiency unit. h*
r + G = y/k = A ……………………………….(5 ) the society as whole the accumulation of human capital.
where G: is the rate depreciation, it exogenous factor, The second factor is the technical changes, and the
Rebelo (1991 PP 504 …) obtain other function: second - sub class of the models attempts to portray
g = (A-G-P)/6 = (r-P)/6 ………………………..( 6) technological changes as the endogenous factor. Arrow’s
G = (A- 6 ) s = Sr (1960), Romer (1986), Who are focused on a role of
These equations obtained when saving are determined single state variable called (knowledge), assumed that
on the assumption that there are ∫ e-pt1/(1-6) [ c(t)1- information contained on innovation and considered as a
6].dt……………………………( 7) non-rival goods. Romer stipulates a research of
Where: P: is the discount rate, or rate of time preference. technology that is concave and
⅙ is the elasticity of substitution between present and
future.
And Q = c(t) + k ………………………………( 8) E.1: Smithian – Marxian model:
Then c(t ), in this mode is the rate of profit which is
determined by technology alone and saving, and the The model can be intuitively grasped in figure (1 ). The
investment mechanism can determine the growth rate. first assumption that there is one good product by itself
as circulating capital and labor Linder constant returns,
2- Below model (returns to capital).: and there is a single method of production is available.
This model preserves the dualism of accumulate and The model can use (U) units of capital and one unit of
nonaccountable factors but restricts the impact of an labor, and the production period (t). Then Q = min (K/U,
accumulation of the former on their returns by L1). It assumed that the fraction of capital uninspected to
modification of the aggregate production function. The the worker at time t. when the wage rates positive than
function which contemplated by this model is: the equilibrium stead y state conditions.
h(k) = f(k) + bk …………………………( 9) Kt=Kt+wtl1 , …………………………….(11 ) ,
Where: h(k) in the per capita production function. Qt=K10=L……………..(12 ),
And b is a positive constant and f(k) is the
conventional per capita production function. Through Figure ( 1): shows this state .
these models, we can summarize the factors which are
constructing the growth as human capital formation. We The equilibrium between demand and supply can be
can depend on a macroeconomic production function: interpreted as the net of supply capital, we can assume
that at time (t), there is full employment of labor, than Lt=
y= AKb (uh)1-bh*y……………………………….(10 ) N and capital at time (t), at time t+1 the demand of labor
 Jihad and Mohammad, 129

Figure 2. The accumulation process in the Harrod-Domar and Kaldor models

is full employment, the steady state of capital supply and we can notice that there is only on cost- minimize. The
demand can be as follow. technique, that implies, that the capital/labor ratio and
I+Gn(w*)=S/(¥+w*)……………………….(13 ) capital/production ratio are determined by : (k/lt=k/Qt=v),
From the adjustment on the capital market between as Harrod and Domar following Keynes who believed
saving and investments is not same as in neoclassical that market mechanism is not able to attain full
economics. employment of labor, they have focused on the
equilibrium of market. They have decided that along the
becomes. on the goods market called a warranted growth
E2: The Von Neumann Model: path. And the warranted growth rate of income allow this
equilibrium can be as:
Smithian von studied the multi-sector version of the Cw=St/Vt………………………..( 14)
Marxian model, then the looks for activity which can be The model structure of the economy is endowed with a
maximized rate of growth and the system associates technology (T), which assumed to be addressed as
competitive price system. His view point that to deal with exogenous. Technical progress, with an amount of labor
labor as classic economists and the focuses on a linear Lt, and stock of capital Kt according to these given, the
because it's produced by liner technology, due to the level of investment can be demonstrated as the action of
wage goods, and his model of multi-sector can become a celebrator principle, and according to the optimal level
the first complete model in which the rate of growth is of capital employed.
endogenously determined, and all factors are Figure (2 ) shows the accumulation process in the
endogenously determined, and all factors of production Harrod – Domar and Kaldor models, the figure describes
are producible. the level of productivity that ensures full employment of
the capital stock , this appears in figure by curve Y,
Saving function Set by assuming that the decay rate of
E.3: The Harrod – Domar Model: capital is S1 0≤ S≤ 1-, white curve (N+S) k indicates to
a number of resources with are necessary to ensure the
(Harrod, 1948) cycle, domains (1945) have developed a reintegration of capital and increase the demand for
macro economic model to analyze the problem of labor equal to the population growth rate.
economic growth, they have paid their attention to make
explicit the relationship between the consumption and
saving by households and the decision of entrepreneurs. E.4: The Solow Model:
The consumption can be defined as an exogenous given
propensity to consume, while the investment decision can (Solow 1999, 2000) in his view, the major problem is to
be a by the accelerator principle. Where production is construct the theory of general full employment growth.
obtained by labor and physical capital, in their analysis And the most important attention should be now to
130 Glo. Adv. Res. J. Manage. Bus. Stud.

Figure 3. The Solow model in discrete time and without technical progress

ensure the convergence toward the natural growth path. have the model of study through specification the
Solow assumes that is only labor and capital factors of equations of the study. Therefore we should determine
production, where the technology is represented by the the variables and data resources of this study.
neo classical production function with constant return of The variables are human capital (H), Growth exchange
scale, also he assumed that the prices are fixed, as a rate age population (∆ Ln pop) real GDP/ person of
result of all market is cleared , and the equilibrium of working Age (Y/w). Inflation is left-1. An accumulation of
capital market fields the investments which are equal to physical capital PC row-1, Tax and nontax receipts to
saving . share of GDP (Tax-1). Total R & D expenditure to GDP
In his opinion production is distributed between saving (R &D grow) Business performed R & D /as a share of
and consumption. If the level of the investment equal to GDP. (BPRD), stock market capitalization as a share of
aggregate saving this equilibrium can ensure the GDP (SMC-1), Trade exposure Trade exp-1).
constancy of per capita capital with full employment, and A: The data sources of the study and methodology:
the equilibrium toward the steady state is attained. Figure 1-central banks of selected Arab countries monthly
(3 ) explained slow ideas model. reports and yearly issues since 2000 to 2016.
A positive rate of technical progress assumed in Solow 2-Arab unified economic reports- the Arab-Monetary
model toward the positive rate of population growth the fund for several, issues for years of study.
figure describes the equilibrium; curve (n-S) k indicates 3-I.M.F yearly reports, development, 2006, 2010, 2015.
the per capita demand for capital, with curve S f (K), B: The growth equation can be derived from the growth
indicates capital supply of capital. If they exceed the full model around a constant return to scale, the empirical
employment steady state with contempt per capita approach adopted in this paper in the first estimation
capital. to reach this study state as full employment on starts with a parsimonious specification of growth
the labor market interest rate will decrease and equation and extended analysis model. The general form
entrepreneurs find it profitable to increase the demand for of the estimation of selected Arab countries can be
capital. written as:

∆ Ln Gdp/Cup=ao1- Ln GDr1t-1+ Q2i Ln his +ai1ln

DATA AND METHODOLOGY Skil-A sipopii+ ai1Ln
Vit + am + is + am +jt + bil ∆ Ln Ski1+B2 ∆ LN hi1+ b3
In the first section stated of introduction of the subject of ∆ ln skill +b3i ∆Bit +
the literature on economic growth which is vast and ∑ Bi j ∆ In Vit +∑ it ……………………………( 15 ).
policy-oriented studies, relaxing the hypothesis of Where: GDP per capital G 8 dependent variable, h
exogenous saving and capital formation, let us have a represents the human capital, pop is population growth
policy of the affected growth in rate. V: vector of a variable affecting economic efficiency,
Short- run via the saving and the level of compositions t represents time trend, Sk represents the propensity an
of investment, also other assumptions which relaxing the accumulate physical capital, b: regressors capture short
basic determinants of growth has been declared throw time dynamic for selected countries, and ∑it: is the
the literature review and the economic growth, then we disturbance error. Results of analysis.
 Jihad and Mohammad, 131

Table 3. Basic statistics for the whole sample as pooled sample:

GDP/per capita (Lin us #) Sample mean St/deviation

Sk(%) 3685.42 4273.89
H(years) 21.167 5.921
(A verge years of education). 9.34 2.163
Inflation -1(%) 8.72 8.4
R & D (%) 0.962 0.643
Stockempital -1(%) 21.419 18.765
Trade exp-1 26.781 16.933
∆ Loop(%) 0.651 0.483
The results of pooled data for all selected Arab countries.

Table 4. augmented analysis for human capital accumulation and trade policy

Estimated variables contrary Human capital Trade policy

Ln t1 Egypt 0.195** (0.23) **
Jordan 0.216** (0.15) **
Tunisia 0.187* (0.12) **
Oman 0.176** (0.17) **
Ln SK Egypt (0.281) * (0.396) **
Jordan (0.195) ** (0.774) *
Tunisia (0.224) * (0.315) **
Oman (0.263) * (0.364) **
Ln GDP/capita-1 Egypt (-0.12) *** (-0.178) ***
Jordan (-0.06) ** (-0.004) **
Tunisia (-0.09) * (-0.016) **
Oman (-0.1) ** (-0.08) *
Classical of thmay Egypt (0.61) (0.38)
capital Jordan (0.59) (0.31)
Tunisia (0.62) (0.27)
Oman (0.60) (0.37)

V1: EMPIRICAL RESULTS: human capital in the selected Arab countries can be
observe equivalent to neoclassical growth model with
A1: The first model results: diminishing returns scale.

Table (3) reports the mean of pooled data and the

standard deviation to the selected Arab countries, to A2: Macroeconomic policy and institutions on
ensure of the st/deviation of the pooled data, the human growth:
capital and R & D exposure. Results are not important in
the regression for pooled due to the analysis of each The table is implied parameters of physical and human
country in this part separately. In the Table (4): We have capital for 4 selected countries and convergence time. In
analyzed the convergence and the capital accumulation all countries convergence parameters is significant ,
for growth for each country the analysis considered as also the human parameters is significant, in the human
augmented for h and trade exposure. capital the speed with which each country converge to its
In so far as the results of analysis, indicates to the specific steady state path of output per capita is ordinary
policy affects the accumulation of human capital must , while the estimates report that about 7 years to 3.9
prominently through education policy in all selected years to go half way to the new steady state output per
countries, and spill-over Not declining returns over capita, with rapid convergence, potential effect on living
some ranges, finally it is important that policies should standard, and will be quickly felt and policy change will
shift into steady states and not have irreversible effects have temporary impact on growth for selected countries.
for these countries, this can happen through developed Results indicate that one extra year of average education
education methods and encouraged research and corresponding to arise in human capital by not less than
develop. The medium output elasticity should be (10%). This can lead to an increase in the average of
associated with a low speed of convergence to the steady –state output/per capita 3-6 percent. Where table
steady state or vice verse. There for the physical and (3), reflects the results of variables which influenced in
132 Glo. Adv. Res. J. Manage. Bus. Stud.

Table 5. declared the Macroeconomic policy affect growth

Dependent variable : ∆ IN GDP/ per capita

Variables / policies Countries With control of

With control of the
inflation inflation and fiscal
policy
Convergence coefficient Egypt (-0.14)* * (-0.16) **
Jordan (-0.12) *** (-0.14) **
Tunisia (-0.13) ** (-0.15) **
Oman (-0.17) ** (-1.13) **
Ln h Egypt (0.68) ** (0.68) **
Jordan (0.49) * (0.62) ***
Tunisia (0.57) * (0.70) **
Oman (0.63) *** (0.59) *
Physical capital Egypt (0.241) (0.203)
Jordan (0.164) (0.156)
Tunisia (0.195) (0.143)
Oman (0.218) (0.192)
Tinrp Egypt 6.4 years 7 years
Way to convergence (1) Jordan 5.9 years 6.3 years
Tunisia 4.6 years 3.9 years
Oman 4 years 3.5 years
* Significant at 1% level, **5% level, *** at 10% level. (1)Half way to convergence implied by
estimated average coefficients of Ln GDP per capita -1.

Table (6): indicators of financial policy results through regression process as panel –pooled estimation.
Dependent variable ∆ln GDP / per capita.
Ln sk Egypt (0.21) ** (0.29) ***
Jordan (0.19) ** (0.22) **
Tunisia (0.20) * (0.18) *
Oman (0.17) * (0.20) *
∆Ln pop Egypt (-5.61) *** (-9.67) **
Jordan (-5.18) ** (-11.21) *
Tunisia (-6.2) ** (-10.19) *
Oman (-3.15) ** (-10.43) **
Ln if 1-1 Egypt (-0.019) **
Jordan (-0.027) **
Tunisia (-0.022) *
Oman (-0.043) *
Ln Gov exp-1 Egypt (-0.10) ** (-0.15) *
Jordan (0.11) (-0.12) **
Tunisia (0.16) (-0.14) ***
Oman (0.12) (-0.10) *
Ln Tax-1 Egypt (-0.32) ** (-0.26) *
Jordan (-0.30) *** (-0.21) ***
Tunisia (-0.28) * (-0.18) *
Oman (-0.47) ** (-0.23) **
Ln trade exp-1 Egypt (0.17) (0.23)
Jordan (0.15) (0.21)
Tunisia (0.145) (0.19)
Oman (0.22) (0.28) **
Log Likelihood Egypt 972 983
Jordan 865 841
Tunisia 917 908
Oman 843 829

Coefficient is estimated without cross-country striations

*Significant at 10% level, **at 5% level , at *** 10%level

macro economic policy for trade expo sure and inflation The regression results show that the long-term
control with fiscal policy in these selected Arab countries. coefficients of variables such as interest which varies
 Jihad and Mohammad, 133

Table 7. indicators of financial policy results through regression process. As panel. Pooled Estimation. Dependent
variable ∆ GDP/per Capita

With control of With stock capitalization

inflation
∆Ln pop Egypt -16.31*** -7.93**
Jordan -13.47** -5.81***
Tunisia -12.36** -5.29**
Oman -12.17*** -5.34***
Lnh Egypt 1.67*** 0.972**
Jordan 1.15** 0.783***
Tunisia 1.04** 0.651**
Oman 0.987** 0.613***
Ln sK Egypt 0.713** 0.451**
Jordan 0.695*** 0.408**
Tunisia 0.681*** 0.405***
Oman 0.603** 0.401***
Ln(to cup)-1 Egypt ------ 0.091**
Jordan -------- 0.063**
Tunisia ------------- 0.60**
Oman ------- 0.053**
Ln Private Credit Egypt 0.061**
Jordan 0.048**
Tunisia 0.053***
Oman 0.039***
Convergence coefficient Ln Egypt -0.106** -0.221**
GDP/percapita-1 Jordan -0.139** -0.291**
Tunisia -0.173*** -0.265**
Oman -0.214** -0.214**
Log-Likelihood Egypt 769 819
Jordan 715 736
Tunisia 728 475
Oman 719 735

along time of study period and country to other, effect supports the economic idea that high inflation ratio
homogeneity of long- run coefficients along the period of adds more noise to capital and other markets and make
analysis data have imposed. In this regression, the life is difficult in a country. And the effect of inflation on all
explanatory variable is physical capital. As a result of the across specific countries in the study is large size
analysis that suggests a positive impact of trade affecting the growth of GDP/per capita.
expenditure of GDP per capita, the process affects the In the financial indicators of analysis of privet credit
operating indirectly of investments which influenced from the banking sector and stock market capitalization
output growth. The variability of inflations and different appears in results of the table (6). Results can support
fiscal policy variables are included in the analysis in order the hypothesis: that the level of financial development
to have key results of stability of inflation variability influenced growth in the specific countries. Results
across countries specification, the size of government accords countries in this study indicate that the
and output of country impacted in results and total tax or developed of the financial system can lead the channel
government expenditure (consumption). These included resources towards the higher return projects. There is the
to the effect on the growth of the size of government wrong relation (negative sign) between the banking credit
specification. There is a negative effect coming from and the privet sector and growth, this means in these
direct tax, where the coefficient on government selected countries that bank credits are related to other
consumption becomes statistically negative impacts on monetary variables, which leading the bank credit
side of government budget. process. When inflation includes there is a positive sign
Over all, the result of fiscal policy variables and will appear, it means that there is a relationship between
macroeconomic variables with both of the influenced in the growth of GDP/per capita and privet credit.
∆LGDP/Per capita, results indicates that the variability of The study is restricted to 4 Arab countries depending
inflation has an important impacts government, growth of on the specification. The period of the study 2000-2016.
GDP/per capita and it has a negative influenced. This And also restricted to the number of variables, these
134 Glo. Adv. Res. J. Manage. Bus. Stud.

Table 8. R& D intensity

Dependent variable: ∆ in GDP/per capita

With total R & D With Business R & D only

∆ lap Egypt -19.76*** -24.01**
Jordan -12.15** -18.73***
Tunisia -11.68** -16.96***
Oman -9.07*** -12.64**
L 1n h Egypt 1.131** 0.89**
Jordan 0.765** 0.651***
Tunisia 0.893** 0.785**
Oman 0.431** 0.27**
Ln Sk Egypt 0.25** 0.19**
Jordan 0.16** 0.21***
Tunisia 0.18* 0.15**
Oman 0.12**
tot
Ln R& D Egypt 0.10**
Jordan 0.07**
Tunisia 0.09**
Oman 0.065**
Ln R& D pub Egypt -0.18
Jordan -0.11
Tunisia -0.10
Oman -0.04
Ln BERD Egypt 0.21** 0.11***
Jordan 0.15 0.07
Tunisia 0.17 0.10
Oman 0.08 0.03
Convergence Egypt -0.22** -0.14**
Coefficient Jordan -0.18* -0.10
∆Ln GDP/per Tunisia -0.15** -0.08
capita Oman -0.17** -0.09
Lag Likelihood Egypt 769 743
Jordan 718 709
Tunisia 772 731
Oman 709 693

variables included beyond to R & D, trade exposures, The 1 percent increase of R & D in countries. The 1
where R & D activity is the expenditure on R & D percent
(intensity) of R & D for each country. The result of the increase of R & D could boost output per capita
analysis is supporting the hypothesis that a significant growth with 21% in Egypt, 18 percentage in Jordan, 17
effect of R & D in each country of selected Arab percent in Tunisia, and 8 percent in Oman, these high
countries, also the positive effect can drive the growth of results due to use the imported R&D and implement in
output and total intensity. The indicator between R & D a country the external lies in R & D activities in
and a Business sector is low in the regression of sample Business and other fields of social life in country.
comprised to trade exposure and R & D. Therefore we
can suggest that there is an interaction between trade
exposure and R & D in all countries selected in this B: The panel data analysis results:
study. economic growth Some economists considered
the state as to generate the basic knowledge not more in The recent growth theories ignored the Solow model;
possible technology spill over. they have concentrated on endogenous growth models,
The changes in R & D do not affect output growth in the which assume constant and increasing returns to capital.
selected countries, in addition to the 0.1 increase of R & Where the neo classical model fails to explain the
D, the effect as 10%, of output growth in Egypt, 7% in difference, in, per GDP capital across countries, in
Jordan, in 9% of Tunisia, and 6% in Oman. The recent years many authors s has led to renew the opinion
easiness with R & D, when we considered a permanent about new thinks of endogenous and exogenous growth
effect on GDP per capita growth, this can be reduced the models, they have renewed their major concerns to the
steady –state level of GDP per capita in these countries. convergence of steady –state. The policies in developing
 Jihad and Mohammad, 135

Table 9. Results of pooled data by OLS

Variables Coefficients St/Error T-statistic Prob level

Constant 12.867 0.3966 45.453 0.0001*
XRAT 0.00048 8.05*10-4 1.726 0.0658
PPP -0.00067 0.000381 -0.1964 0.5109
P 0.001782 0.00678 0.289 0.634
PG -0.02196 0.005481 -2.963 0.0038
PL 0.00584 0.002932 2.784 0.0044
Y -0.00482 0.003671 -1.256 0.1654
1.627-e5 9.673 0.0001
2
R = Egypt : 0.6632. Jordan : 0.614. Tunisia : 0.6932. Oman 0.6144.

Table 10. fixed effects model(LSDV) for selected Arab countries (2000-2016).

Variable Coefficients St/dr t-statistic Pro/leve

Constant 11.0763 0.2937 43.138 0.000
XRAI 0.000981 0.000065 1.275 0.154
PPP 0.000672 0.000159 1.132 0.186
P 0.00163 0.006421 0.2478 0.815
PG -0.03687 0.00528 3.967 0.0001
PI 0.02831 0.00234 3.986 0.000
T -0.03776 0.008654 -2.843 0.003
RGDP/worker 0.000245 0.000932 -3.09 0.002
Egypt 0.01693 0.12106 3.16 0.06
Jordan -0.4376 0.1652 -2.789 0.000
TuniSia 0.17724 0.1733 1.563 0.153
R2 E0.7563 Oman 0.763
J 0.07482
T 0.7369

countries based on their needs to channel more money Ch DPit=Qil + Re x RAT +As PPP it + Q4 Pie+ As PGit +
into education, capital investments, and works programs. A6PIit+ B a bit
Also, their main concerns to the investments of infra +RS RDdp works it+ ∑it.
structures and health, in other hands there ………………………………..(18 )
Policies as a consequential acts o promote openness of
the economy. And in order to minimize the adverse Where: CGDP it= Gdp per capita, PPPx is purchasing
effects on economic growth of supply shocks in their power parity over GDP for x countries, Pit is the price
main sector of the economy.(Swamy et..al, 1989), used level of GDP, PG presents the price level of government,
in their study an extension of random effects model, the PI represents price level of investments, RDdp work it is
model which used as: the real chain per worker. XRAI is the exchange rate of
each country. I stand for I the cross section.Al unit, and t
GDP = But it +∑ it …………………………( 16) for its time period
where t =1,2,… T and i=I, B.2 .Fixed effects models: the fixed effects model used
to analyze data with (interceptor individuals).
Bt= B+ vt. ………………………… (17 ) Where E From table (9) there is positive relationship except for
(v)=0and var (Vt)=l PPP, PG, and Y, while R2 determinant is (0.724), also it
is reasonably high. While the positive relationship
In this study, we have used a specific model with the between X Rat, and P and PI with Ln GDP per capita,
significant test with Breach Pagan, Hausman test, and F also RGDP/worker it has a positive relation. The cross-
– test world income to the data model results. sectional unit/each country, the intercepts is varied when
B1: pooled OLS: using the dummy variables for fixed effects. While
We have pooled all data and run OLS regression models, dummy variable for Oman country which used us
according to the assumption that all coefficients are comparison country, a low P-Value (0.0001) country
constant across time and individuals. The model can be against the null hypothesis it signs that pooled model is
as: adequate.
136 Glo. Adv. Res. J. Manage. Bus. Stud.

Table 11. Country intercept Value

Intercept Country Value

1. Oman 11.0763
2. Egypt 10.8742
3. Jordan 8.5543
4. Tunisia 8.6272

Table 12. Random effects models for CGDP data of selected Arab countries (2000-2016)

Variable Coefficients St/Error T-Stat Prob/level

Constant 10.927 0.2844 36.755 0.000*
XRAT Egypt 8.43e-4 6.38 e-4 1.48 0.0181
Jordan 6.16e-4 6.76 e-4 1.76 0.0214
Tunisia 6.09e-4 5.72 e-4 1.72 0.0213
Oman 5.98e-5 4.01 e-5 2.01 0.162
PPP Egypt 0.00036 0.00027 1.281 0.2162
Jordan 0.00027 0.00021 1.263 0.2310
Tunisia 0.00031 0.00023 1.341 0.2204
Oman 0.0042 0.00019 1.520 0.3180
P Egypt 0.00189 0.00765 0.2673 0.8769
Jordan 0.00175 0.00643 0.2844 0.9613
Tunisia 0.00163 0.006215 0.2930 0.9724
Oman 0.00172 0.006984 0.3105 0.9931
PG Egypt -0.0.02786 0.00534 -4.18 0.000*
Jordan -0.03115 0.006422 -4.73 0.001*
Tunisia -0.0293 0.00731 -4.96 0.002*
Oman -0.2615 0.00548 -4.29 0.006*
P1 Egypt 0.02341 0.002891 4.16 0.00*
Jordan 0.02183 0.002163 4.28 0.00*
Tunisia 0.02477 0.002561 4.32 0.00*
Oman 0.02551 0.002763 4.48 0.00*
T Egypt -0.0263 0.005392 -2.96 0.036*
Jordan -0.0197 0.00654 -3.17 0.002*
Tunisia -0.0248 0.00728 -3.08 0.001*
Oman -0.0216 0.005431 -2.94 0.001*
RGDP work Egypt 0.00039 1.36e-05 17.96 0.000*
Jordan 0.00028 1.33e-05 17.84 0.000*
Tunisia 0.00021 1.28e-05 16.97 0.000*
Oman 0.00024 1.29e-05 7.63 0.000*

B3 :The fixed effects models can be as: The PP, PG. Have a negative on CGDP.interplant. Us
Yit=ao+a1D2i +a2Dzi+ individuality of each country is varied Fund Table (12)
a3Dui++B2xRATit+B3pppxt+B4Pit+B5Pgit+B6PI+B7yit+ results. the dummy variable for fixed effects for Oman
B8 RGDPworket. which used as a comparison country.
Where: D2i =if observations for Egypt, otherwise=0,
D3=if observation belongs to Jordan, otherwise =0.D4=1
if observation for Tunisia otherwise=0, to avoid falling C: Random effect models:
into the dummy variable trap. we did not use the dummy
for Oman, Therefore a represent the intercept of Oman The intercepts in random effects model assumed to be
and a1, a2 and a3 are the different intercept coefficients, random outcome variable a and to be a function of a
can tell us how much the intercepts of countries differ mean value plus a random error. the random effects
from Oman interplant. table (10) represents the results. model can be written as:
There is a positive relationship of Ln GGDP to ward GDDPit =Qit +O2xRATit +A3PPPxit + A4pit+AspGit
XRAT, P, Pi, PG, PGDP worker. +a6PIit+a77it+a8RGDP Trade +∑it.
 Jihad and Mohammad, 137

Table 13. - Across sectional unit the random error.

Cross-section random(sigma - 0.3658 0.2165

4)S.D/Rho
Idiosycdri random sigma-2 0.63814 0.9367

Table 14. cross. Section Random effects for (intercept countries values)

Cross section Country Value

1 Egypt 0.9164
2 Jordan 0.7243
3 Tunisia 0.7155
4 Oman 0.6982

Table 15. Effect specifications of the study group

t-state P-value
Cross sections/Rho(sigma-4 0.3672 0.2851
Idiosyncratic S.D/Rho Sigma –e 0.6397 0.9344

Ali=a1+ ∑I, I =1,2,3,…N. V 11: CONCLUDED REMARKS:

And Ail i8 net fixed, lob it assumed as intercept with (∑i) We have studied the selected countries through two
the random error, with a value of zero and various of methods, first to study the steady state levels of selected
63.Therefore we can write the model in new phase as: countries rather than the different position of the country
CGDPit=a1+G2XRATit+A3PPPxit+ A4Pit +As PGit + a6 along transitional paths, the second method is through
Plant + a77it+ a8 RGDP look it + wit panel data analysis, through fixed effect and random
…………………….( 19) effect.
Where: Wit= ∑it +µ it. The financial structures and micro economic
- Across sectional unit, the random error( Wit ) is to be conditions and policy settings seem to play an important
heterogeneity, and constant over time where E(wit [x] = roles in GDP per capita of each country of the study,
σ2i their fore in the first method we have chosen stock
capital, human capital, inflation rate population growth,
When we applied the model we assumed that the slope physical capital, trade and R& D as variables to study
coefficients are constant across cross- sectional, the the selected countries as a group, in consequence, the
intercept of Oman is a comparison cross- sectional for changes which happen in these variables can rapidly
the study group. capital, The unique financial and affect the living standards and make some changes in.
monetary policy of each government can be the effect the A low side of the range has been noticed when we
trade policy of the country as (export and import of goods estimated the elasticity of output to human capital, thesis
and service, and the effect of the exchange rate, the results can point the investment and the potential effort
prices of another country of the goods and services. externalities in the investment of education a d training of
From table (15) the random error component of Oman each country, but in these countries the ---- curatively
tells us how much it, from the International value of the low.
study. Similar cross-section random value of Egypt, The results indicate that government size in the
Jordan, and Tunisia. Oman 11.076 Egypt 10.87, Jordan economy as overall may reach levels that hinder growth,
8.88 and Tunisia 8.627. F-test for group effects has in the long run, education, expenditure of government on
applied, the result of the test is 27.0563with P-value health, and educational training can seem sustains wing
0.00045, therefore this results counts against the null standard, the results of the study advise and suggest
hypotheses that pooled OLS made is adequate. Also, that higher direct taxied to lower GDP precipitate, also
Hausman test is applied to test the fixed error mode or government expenditure in both directions consumption
error component model the results is Hausman test and investment which should tend to have monetary
=18.732 with prob level clique(3) =0.04228. This small P- effects on GDP per capita, and this may also influence
value shows that the coefficients estimated differ in each growth.
model. The study has proved an evidence that high inflation
138 Glo. Adv. Res. J. Manage. Bus. Stud.

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