Determinants of Economic Development: A Case of Gulf Cooperation Council (GCC) Countries

Abstract

The main objective of this research is to identify the determinants of economic development in Gulf Cooperation Council (GCC) countries over the period of 1996-2016. The economic growth of GCC countries has slowed down due to a sharp drop in oil prices as GCC countries are depending on oil exportation for their economies. The GCC countries preferred to diversify their economies through the strategic plans called Vision 2030. The Vision 2030 for Gulf countries started in Saudi Arabia in 26 April 2016 when the Crown Prince (Mohammad bin Salman Al-Saud) declared that Saudi Arabia has to not depend on oil exportation substantially and that the diversification of oil is a must. The economic growth can be measured through the gross domestic production (GDP). Higher GDP indicates a better economy and higher standards of lives (welfare). Based on this, this research is finding the main indicators of economic development through regressions of fixed-effects model (FEM), random-effects model (REM), generalized methods of moments (GMM) and generalized least squares (GLS) models. The results show that production and rule of law strongly support the economy. In contrast, political instability and a larger population impact economic growth significantly and negatively. In addition, the global financial crisis (GFC) also decreased the economic strength significantly. This study helps the policymakers in economics sector to focus on the positive determinants and to avoid (or reduce) the implementation of the negative factors. In addition, the researcher on economics can be benefited from this study.

Exploring Indicators Impacting Gross Domestic Product: A Case of the Gulf Cooperation Council Members

“…By looking at the related previous studies, there are many studies in the literature review that have investigated the determinants of economic growth, such as the studies of Ying et al (2022) on Organization for Economic Co-operation and Development (OECD) countries and Rahman and Alam (2021) on the group of 20 (G20) countries. On the other side, there is a limitation to the studies in the literature review that explore the drivers of economic development in Gulf Cooperation Council countries (Alharthi, 2019). Gazdar et al (2019) examined the main drivers of economic growth using gross domestic product per capita as a dependent variable for Gulf Cooperation Council members through the period of 1996-2016.…”

“…In addition, trade openness and government expenditure decreased the gross domestic product per capita significantly. Alharthi (2019) did another study on the factors that affected the gross domestic product per capita in Gulf Cooperation Council countries from 1990 to 2016. This study used the generalized method of moments (GMM), fixed-effects model (FEM), and random-effects model (REM) regressions.…”

Challenges of food security in the Gulf Cooperation Council countries: an empirical analysis of fixed and random effects

“…Increasing population is a key strategic challenge for the GCC countries. Alharthi [9] investigates that population growth in the GCC countries affected the economies significantly and adversely. The GCC countries have rapidly expanded GCC populations as a result of the large foreign migrant workforce.…”