Volume 2, Issue 3

This paper analyzes the effects of natural resource wealth on the economic and political environment of a country. A dynamic game-theoretic model is used to highlight the policy choice of the government vis-a`-vis the opposition. The government utilizes both economic and other policy tools to further its own interests. These policies include repression, co-option of the opposition (by way of sharing the natural resource wealth), taxation, the level of commitment to expanding the resource base through further exploration, and extraction of existing resources. The opposition is in the private sector and chooses how much of its wealth to save and invest and on whether or not to accept what is offered to it by the government and, if not, to start a civil war. In contrast to other political economy models that involve such phenomena as repression and civil wars and which view the political game as one between the government and the marginalized peasantry, this model views the game as between the government and another e´ lite group. The model is used to explain several quite different political outcomes observed in countries endowed with natural resources. These include repressive regimes, democratic regimes, benevolent autocracies/‘ sham democracies’, instability and civil war. The analysis shows how these outcomes depend on technology driving the process that converts income into consumption, the likelihood of finding additional natural resource wealth through exploration, the size of the private sector and other factors. The model is also illustrated empirically by comparing the governance and other characteristics of countries with different levels of natural resource wealth.

This study presents new empirical evidence on the relationship between the level of economic growth and defense expenditures in the case of Turkey for the period of 1950–2002. On using new macroeconomic theory and multivariate cointegration procedure, this study demonstrates empirically that there exists a positive long-run relationship between aggregate defense spending and aggregate output in Turkey. In addition, the CUSUM and CUSUMSQ tests confirm the stability of the aggregate output function. The results obtained from this study are, by and large, in line with the previous studies concerning Turkey.

When holiday variation is present so that the dates of certain holidays change from year to year, the relatively automatic seasonal adjustment procedures may fail to extract the seasonal component from a series since the holiday effects are not confined to that component. Turkey, a predominantly Muslim country, constitutes a good example of moving holidays since the official calendar is Gregorian, based on the cycles of the Earth around the sun, while significant Islamic holidays are tied to the Hegirian calendar, based on the lunar cycles. One finds significant deterministic seasonality remains in the conventionally de-seasonalized time series and removing the effects of religious seasonality using a very simple method improves the qualities of the de-seasonalized component.

This paper utilizes Feder’s production function in revisiting the relationship between exports and economic growth by testing the hypothesis of the export-led growth in relation to the Arab Republic of Egypt. It also aims to show the difference in the marginal productivities between the export and non-export sectors in Egypt and how the export sector can positively affect the non-export sectors. The model mainly adopts a supply-side description of the economy, using the neo-classical growth approach under the framework of an aggregate production function. The conclusion of the study is that marginal productivities are higher in the export sector than in the non-export sector. This will allow the Egyptian economy to grow faster without having new capital infusion or labor expansion simply by reallocating the limited resources into the export sector. The reallocation of resources to the export sector will produce positive externalities and result in higher productivity for the whole Egyptian economy.

Unlocking the Employment Potential in the Middle East and North Africa: Toward a New Social Contract. MENA Development Report (Washington, D.C.: The World Bank, 2004), 262 pp., $25.00, ISBN 0-8213-5678-X