The Effect of Manufacturing Value Added on Economic Development: Empirical Evidence

Abstract

Purpose: This study aims to discern the critical role of manufacturing value-added to the economic growth of the GCC countries. Similarly, gross fixed capital formation, total labor force, and technology with economic growth were also examined.

Data: This research evaluates the data of six GCC countries that includes Kuwait, Qatar, Oman, Saudi Arabia, United Arab Emirates, and Bahrain which started from 1980 to 2020 and used well know econometric panel framework. 

Methods: The econometric methods included panel unit root testing based on Im-Pesaran-Shin and Fisher. The long-run association was extracted based on the fixed effect econometric model followed by residual diagnostic testing that include Pesaran test for cross sectional independence to validate outcomes.

Findings: The outcomes of panel unit roots suggest all variables are integrated at order and hence provide a platform to move on to check long run association between variable. The overall outcomes of this study revealed that manufacturing value-added, gross fixed capital formation, labor force, and technology are a positive and significant relationship with economic growth in the long run. The policymakers should concentrate on enhancing manufacturing growth by increasing its productivity and raising employment to boost healthy and sustainable economic development in the GCC countries.