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Publications & Research :: Policy Research Working Paper

Governance and Private Investment in the Middle East and North Africa

ACCELERATOR ACCELERATOR EFFECT ACCOUNTABILITY ADMINISTRATIVE SYSTEM ADVERSE EFFECTS AGGREGATE DEMAND AGGREGATE INDICATOR ASYMMETRIC INFORMATION BANKING SECTOR BUREAUCRACY BUREAUCRATIC QUALITY BUSINESS ENVIRONMENT CAPITAL ACCUMULATION CAPITAL FORMATION CAPITAL STOCK CAPITAL THEORY CITIZENS CIVIL LIBERTIES CIVIL RIGHTS COMPETITIVE MARKETS COMPETITIVENESS CONSENSUS CORRUPTION COST OF CAPITAL CRISES DEBT DECISION-MAKING DECISION-MAKING PROCESS DEMOCRATIC ACCOUNTABILITY DEMOCRATIC INSTITUTIONS DEMOCRATIC PARTICIPATION ECONOMETRIC ANALYSIS ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC POLICIES ECONOMIC POLICY ECONOMIC REFORMS ECONOMIES OF SCALE EDUCATIONAL ATTAINMENT ENDOGENOUS VARIABLES EQUATIONS EXPORTS EXTERNAL FINANCING FINANCIAL CRISIS FINANCIAL DEVELOPMENT FINANCIAL MARKETS FINANCIAL SYSTEM FIXED CAPITAL GDP GDP PER CAPITA GOOD GOVERNANCE GOVERNANCE DATA GOVERNANCE INDICATORS GOVERNANCE INSTITUTIONS GOVERNANCE PERFORMANCE GOVERNANCE QUALITY GOVERNANCE VARIABLES GOVERNMENT EFFECTIVENESS GOVERNMENT OFFICIALS GOVERNMENT REGULATIONS GOVERNMENT SERVICES GROWTH MODEL GROWTH RATE HUMAN CAPITAL HUMAN DEVELOPMENT INCOME INEQUALITY INSTITUTIONAL ARRANGEMENTS INSTITUTIONAL CHANGE INSTITUTIONAL QUALITY INTEREST RATE INTERNATIONAL FINANCE INTERNATIONAL INVESTORS INVESTMENT CLIMATE INVESTMENT DECISIONS INVESTMENT FUNCTIONS INVESTMENT PROJECTS JUDICIARY LABOR COSTS LABOR FORCE LEGAL SYSTEM LEGITIMACY MACROECONOMICS MARGINAL BENEFIT MARGINAL COSTS MARKET SIZE MIDDLE EAST MIDDLE EASTERN NATURAL RESOURCES NORTH AFRICA OPTIMIZATION POLITICAL INSTABILITY POLITICAL PARTIES POLITICAL RIGHTS POLITICAL STABILITY POLITICAL SYSTEM POSITIVE EXTERNALITIES PRIVATE CAPITAL PRIVATE INVESTMENT PRIVATE INVESTMENTS PRIVATE INVESTORS PRIVATE PROPERTY PRIVATE SECTOR PRODUCTION STRUCTURE PROFITABILITY PROPERTY RIGHTS PUBLIC ACCOUNTABILITY PUBLIC DEBT PUBLIC GOODS PUBLIC INVESTMENT PUBLIC SERVICES PUBLIC SUPPORT REAL INTEREST RATE REDUCING UNCERTAINTY REGULATORY QUALITY REVERSE CAUSALITY RULE OF LAW SKILLED WORKERS SOCIAL INSTITUTIONS STATE- OWNED ENTERPRISES STRUCTURAL REFORMS TAXATION TRADABLE GOODS TRADE POLICY TRADE REFORMS TRANSACTION COSTS TRANSPARENCY VESTED INTERESTS
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World Bank, Washington, DC
Middle East and North Africa
2012-06-19T16:40:52Z | 2012-06-19T16:40:52Z | 2006-06

This paper addresses the issue of the low level of private investment in the Middle East and North Africa (MENA) region, with special emphasis on the role of governance. Based on the existing literature, the authors categorize what types of governance institutions are more detrimental to entrepreneurial investments. They then estimate a simultaneous model of private investment and governance quality where economic policies concurrently explain both variables. The empirical results show that governance plays a significant role in private investment decisions. This result is particularly true in the case of "administrative quality" in the form of control of corruption, bureaucratic quality, investment-friendly profile of administration, and law and order, as well as for "political stability." Evidence in favor of "public accountability" seems, however, less robust. The estimations also stress that structural reforms-such as financial development and trade openness-and human development affect private investment decisions directly, and/or through their positive impact on governance. These findings bring new empirical evidence on the subject of private investment in the developing world and in MENA countries in particular.

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