Investigating the Relationship between Physical Infrastructure and Economic Growth in the Middle East and North Africa

Abstract

This paper investigates the impact of physical infrastructure development on economic growth in MENA region. It adopts generalized method of moments with system estimators to estimate an endogenous growth model during 2000-2016 for a sample of 30 developing or emerging countries including nine MENA countries. It utilizes the generalized method of moments (GMM) to account for heterogeneity and endogeneity in the specified model. This growth model is augmented with a synthetic infrastructure quantity index developed using the principal components analysis (PCA) for two infrastructure sectors, which are telecommunications and energy. The results reveal that infrastructure quantity has contributed positively to economic growth for the whole sample of countries as well as MENA countries, and the specification tests validates the specified model.