Does the Quality of Institutions Limit the MENA's Integration in the World Economy?
Version of Record online: 8 OCT 2004
The World Economy
Volume 27, Issue 9, pages 1475–1498, September 2004
How to Cite
Méon, P.-G. and Sekkat, K. (2004), Does the Quality of Institutions Limit the MENA's Integration in the World Economy?. World Economy, 27: 1475–1498. doi: 10.1111/j.0378-5920.2004.00661.x
- Issue online: 8 OCT 2004
- Version of Record online: 8 OCT 2004
Using a large sample of countries over the 1990s, this paper examines the extent to which institutions’ functioning disables a greater participation of the Middle East and North Africa (MENA) in the world economy. It focuses on the impact on manufactured exports and FDI attractiveness and considers a broad index of political risk as well as indices targeted toward specific aspects of governance (corruption, government effectiveness and the rule of law). The results are robust to different econometric approaches and lend strong support to the hypothesis that the functioning of institutions may disable the participation of MENA countries in the world economy. They suggest that the impact of an improvement in the quality of institutions may result in a sensitive increase of FDI inflows and manufactured exports. That increase is comparable to the one resulting from liberalisation policies. Hence, although institutional reforms can take time, they deserve the necessary efforts given their outcomes as compared to other reforms.