Determinants of Conditional Convergence of the MENA Region Towards the Euro Zone : The Institutional Effect

The question of convergence between poor and rich countries is a central issue in economic growth debate in the last years. This paper investigates the β-conditional convergence of the MENA (Middle East and North Africa) region towards the Euro Zone using a set of macroeconomic, institutional and government performance variables. We estimate a panel data with instrumental variables using the Hausman and Taylor method over the period 1980-2011. Our main findings highlight on the one hand, research and development and government consumption are the most important variables determinant of convergence. On the other hand, we emphasize the role of institutional quality like socio-economic conditions, investment profile and regulatory quality are relevant drivers of convergence of the MENA region towards the Euro Zone