Critical assessment of the convergence hypothesis in the MENA

region using the Solow Model:

The convergence hypothesis presented by the Solow model implies how different economies are able to
get to their steady state and grow in the long run either in terms of living standards or catching up as in
reference to attaining the same levels of upward growth. According to the absolute convergence, poor
countries will ideally catch up with the rich ones. Consequently, all these countries will eventually
maintain their steady state in the long run, regardless their structural characteristics. Which is not quite
the case, however, for the conditional convergence. As the latter implies that only countries with
roughly the same initial levels, mainly in terms of economic development, government policies, and
technology, are more likely to converge toward a similar GDP per capita and growth rate. This
inevitably raises the formation of the “convergence clubs” phenomenon.
In order to test both the absolute and conditional convergence hypothesis among MENA region, we
started by collecting datasets of 21 MENA countries, including Algeria, Saudi Arabia, Bahrain, the
Palestinian Authority, Djibouti, Egypt,United Arab Emirates, Iran, Iraq, Jordan, Kuwait, Lebanon,
Libya,Malta, Mauritania, Morocco, Oman, Qatar, Syria, Tunisia, Yemen, from the World Bank
Development Indicators along with Our World in Data online dataset. We have considered the two-
decade period from 2000 to 2020 as the time horizonso that we can incorporate as much data as possible
in this course project. Aside from the two main variables to which the main part of our study is related
(GDP per capita & growth rate), we backed it up with further indicators namely, average population
growth, gross savings, average years of education, and others. This will allow us not only to ensure that
countries classified in convergence clubs are characteristically on the same page, but also to help us
easily assess the conditional convergence hypothesis.
Results after having done the necessary calculations in order to show the type of relationship between
the GDP per capita and the growth rate over the last two decades among the MENA countries are
demonstrated in the following figures:

Absolute convergence:
Average years or education
Lebano Morocc Tunisi Algeri Qata jordan yama
Egypt UAE
n o a a r lybia n
6,450 8,000 4,150 6,350 7,098 9,621 9,052 6,817 9,9 2,6
kuwa Saudi bahra pelstin djibou maurita Oma syria
iran iraq malta
it arabia in e ti nia n
6,29 10,08 5,53
6,65 9,05
8,612 8,724 8,648 3,840 8 3 3,788 7,900 3
 Average population growth
Lebano Morocc Tunisi Algeri Qata jordan yama
Egypt UAE
n o a a r lybia n
1,992 2,908 1,226 0,969 1,710 5,735 7,712 1,258 3,366 2,700
kuwa Saudi bahra pelstin djibou maurita Oma syria
iran iraq malta
it arabia in e ti nia n
3,729 1,235 2,652 4,458   1,647 2,721 1,287 2,846 3,898 0,371

Gross savings
Lebano Morocc Tunisi Algeri jordan yama
Egypt UAE Qatar
n o a a lybia n
16,78 50,55 59,71
1,650 29,760 16,888 46,527 49,252 18,388  
9 3 7
kuwa Saudi bahra pelstin djibou maurita Oma syria
iran iraq malta
it arabia in e ti nia n
47,06 30,40 30,07 19,95 27,66 24,23
 
8 38,773 3   29,426 2 1 29,810 4 9

Initial GDP per capita

Lebano Moro Tunisi Algeri jordan yaman
Egypt UAE Qatar
n cco a a lybia
5716,65 1976, 3001,7 3960, 7414, 39194, 60809, 165162 554448
1981,831
9 091 78 314 362 677 108 2,000 ,000
Saudi syria
bahra pelsti djibo maurit
kuwait iran arabi iraq malta Oman
in ne uti ania
a
1844037 167000 9171, 13636, 1476, 768,1 4883, 10432, 8601,2 1177,
8,000 9,000 330 396 172 76 500 328 676,568 72 629

trade
Leban Moroc Tunisi Algeri jordan yaman
Egypt UAE Qatar
on co a a lybia
47,60 56,58 144,00 91,68
80,548 74,816 97,130 96,828 134,951  
7 6 9 5
kuwa Saudi bahra pelsti djibou maurita syria
iran iraq malta Oman
it arabia in ne ti nia
93,28 146,81 291,4 91,36 271,5 105,3 72,32
48,147
8 76,633 0   68 4 58 84,691 86 9
 Growth rate
Lebano Morocc Qata jordan yama
Egypt Tunisia Algeria UAE
n o r lybia n
8,72 48,25
4,390 3,123 4,117 3,151 1,957 4,209 3,982 -0,060
9 6
kuwai Saudi bahrai pelstin djibou mauritan syria
iran iraq malta Oman
t arabia n e ti ia
4,97 5,19
2,997 2,288
3,477 4,419 3,911 7,318 7 4,032 3,558 3,281 5

Correlation between growth rate and initial gdp per capita

Lebano Morocc Qata jordan yama
Egypt Tunisia Algeria UAE
n o r lybia n
0,35
-0,011 0,336 -0,326 -0,419 -0,475 0,066 0,124 -0,419 0,239
6
kuwai Saudi bahrai pelstin djibou malt mauritan syria
iran iraq Oman
t arabia n e ti a ia
-
0,45 0,27
-0,060 -0,506 0,030 -0,215 0,098 -0,108 0,36 0,116 0,411
3 9
9
 Conditional convergence:
We classified our 21 countries into 4 categories: low income countries, middle
income countries (lower and upper) and high income countries, based on a study
made by the global economic prospects in 2000 to analyze the correlation:

low income

  yemen
Average population growth 2,700
Source: World Bank
Gross Savings (% of GDP)
 
Source: World Bank
Initial GDP per capita (2000 554448,000
Source: World Bank
Average years of education 2,6
Source: Our World in Data
Average growth rate -0,060
Source: World Bank
Trade (% of GDP)
 
Source: World Bank
Correlation between GDP per 0,239
capita and Growth rate

Middle income countries:

Lower:
  lower
algeri djibou moroc maurita tunisi
  iran iraq jordan syria a ti egypt co nia a
Average
populati
on
growth 1,235 3,366 1,710 1,992 1,226 0,969
Source:
World
Bank 2,721 0,371 1,647 2,846
Gross
Savings
(% of
GDP)   18,388 46,527 16,789 29,760 16,888
Source:
World
Bank 30,072 24,239 29,426 29,810
Initial
GDP per
capita
(First
year of 1670009, 1651622, 3960,3 768,17 1981,8 1976,0 3001,7
the time 000 000 14 6 31 91 78
horizon)
Source:
World 4883,5 1177,6
Bank 00 29 676,568
Average
years of
educatio
n 9,05 9,9 7,098 6,450 4,150 6,350
Source:
Our
World in
Data 6,298 5,533 3,840 3,788
Average
growth
rate 2,288 3,982 1,957 4,390 4,117 3,151
Source:
World
Bank 4,977 5,195 7,318 3,558
Trade
(% of
GDP) 56,586 47,607 74,816 97,130
48,147 134,951
Source:
World 91,36 72,32 291,4
Bank 4 9 68 84,691
Correlati -0,506 -0,369 -0,419 0,279 -0,475 -0,108 -0,011 -0,326 0,116 -0,419
on
between
GDP per
capita
and
Growth
rate

Upper:
lebano
  bahrain n oman saudi arabia lybia
Average population growth 2,908 1,258
Source: World Bank 4,458 3,898 2,652
Gross Savings (% of GDP) 1,650 59,717
Source: World Bank 30,403 27,664 38,773
Initial GDP per capita (First year
13636,39 5716,65
of the time horizon) 6 9 8601,27
60809,108
Source: World Bank 2 9171,330
Average years of education 8,000 6,817
Source: Our World in Data 8,724 7,900 8,612
Average growth rate 3,123 48,256
Source: World Bank 4,419 3,281 3,477
Trade (% of GDP) 80,548 96,828
Source: World Bank 146,810 105,386 76,633
Correlation between GDP per 0,336 0,356
-0,215 0,411 0,030
capita and Growth rate

High income countries:

high income countries

kuwait qatar UAE Malta

3,729 7,712 5,735

1,287

47,068 50,553 49,252

19,951

18440378,000 39194,677 7414,362

10432,328

6,65 9,052 9,621

10,083
2,997 8,729 4,209
4,032

93,288 91,685 144,009

271,558

-0,060 0,124 0,066 0,453