Dynamics of Output Growth and Convergence in the Middle East and North African Countries: Heterogeneous Panel ARDL Approach

The present study investigates the convergence process of per-worker output for a panel of 15 countries in the Middle East and North African (MENA) region over the period 1970-2016. Further, the study discusses the dynamic impact of various productive factors (physical capital, human capital and total factor productivity) on per-worker output. In order to estimate the long-run relationship, the paper employs various dynamic panel autoregressive distributed lag (ARDL) models. The econometric approach controls for cointegration, nonstationarity, heterogeneity and cross-sectional dependence in the variables and residuals. The results suggest the presence of cross-sectional dependence and mixed order of integration of the variables. The statistical results of Pedroni and Westerlund cointegration tests indicate that per-worker output, physical capital stock, human capital stock and total factor productivity tend to have a long-run relationship. The four-step methodology adopted in the present study consistently accepts the conditional beta-convergence towards steady state of output per worker. Besides, the paper finds a positive impact of physical capital and total factor productivity on long-run economic growth.