Empirical Analysis of the Determinants of Structural Transformation in the MENA Region

Abstract

The purpose of this article is to establish an empirical link between the determinants of structural change and a set of economic variables proposed in theoretical and empirical literature. Our prediction was for structural change due to the diversification and sophistication of exportation. To do this, we use a generalized method of the moments dynamic panel regression technique to identify the key fundamentals of export sophistication and diversification in certain *economies in the Middle East and North Africa region over the period 2000–2017. Empirical findings show a positive relationship between export sophistication and foreign direct investment, financial openness, human capital, infrastructure, and institutional quality. At the same time, there is a positive link between diversification, trade openness, human capital, population, and infrastructure. Nevertheless, the results suggest that countries in the MENA region must put in place policies that focus on developing human capital and strengthening education, facilitating all forms of trade and transactions, and improving the quality of their institutions.