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Volume :22 Issue : 3 2015      Add To Cart                                                                    Download

The Impact of Diversification on Economic Growth in Saudi Arabia

Auther : Mamdouh A. Alkhatib

This paper addresses the question of the relationship between diversification and growth in Saudi Arabia economy during the period 1970-2013. The diversification is measured by the complement to one of the Herfindahl-Hirschman index and applied for five variables: real GDP, exports, imports, government revenues and fixed capital formation. The annual growth rate of the diversification coefficients are (0.91%), (7.9%), (-0.6%), (-0.2%) and (0.1%), respectively. A composite diversification coefficient is calculated as the weighted mean of the five simple diversification coefficients where its annual growth rates are (0.74%). The study found that the Saudi economy realized a moderate and insufficient diversification degree. An econometric model is formulated to study the relationship between the economic growth and the composite diversification coefficient. The economic growth is explained by the growth rate of: labor force, fixed capital formation, real product of the oil sector, composite diversification coefficient, and the dummy variable. The OLS estimation reveals a negative relationship between the economic growth rate and the composite diversification coefficient, which means that the economic diversification does not a positive impact on the Saudi economic growth.

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Nov 19, 2019

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