Institutions, Governance and Technology Catch-Up in North Africa

Abstract

This paper aims to analyse the effects of institution quality on technology catch-up in five North African countries (Algeria, Egypt, Morocco, Sudan and Tunisia) compared to 3 groups of developing and emerging countries (Sub Saharan Africa, Asia, and Latin America) over the period 1970-2005. The study adopts a two-stage methodology. In the first step we estimate the technology gap using the matafrontier approach. In second step we test the relationship between the technology gap and the quality of governance. The empirical results show that institutions (corruption, law and rules and investment climate) are very important in closing the technology gap and speeding up the technology catch-up. Other determinants of the technology gap are also identified: foreign direct investment, human capital and trade.

Keywords: metafrontier, technology gap, catching-up, efficiency, stochastic frontier

JEL Classification: C33, O47, O57, K49, O1