Wednesday, March 11, 2009

Gulf Countries rich in oil

The price of oil and huge expenditures relating to the second Gulf war, in recent years, the countries of the GCC (Gulf Cooperation Council) have tried to find new ways to secure and diversify supervision revenue. In addition, expenditures are also under scrutiny. Taken as a whole, the need to alter fiscal policies and re-examine the size of government is now a practical requirement in these countries. In addition, the new wave of monetary literature calling for a general retreating role of government in the advance process has reinforced and optimistic this position. The Gulf countries have distinct uniqueness ranging from their economic confidence on oil revenues for development plans, to the profit of emigrant workers in their labor force. This distinctiveness has implication relating to the size and role of regime.

Gulf countries of the Middle East, but the size of government, on average, are too large to be optimal. The Barro rule states that government services are optimally present when their marginal product is equal to one.Employing the methods of Barro and Karras, a simple fabrication function is utilized where national output is a function of capital, labor, and government services. After differentiating the aggregate production function with respect to time, several hypotheses were tested. Individual country results were mostly inconclusive, due Likely to relatively small samples. Testing was then undertaken with panels created by pooling time series from each country. Panels were tested with and without Kuwait. Results of estimation revealed that government services were productive on the margin, but the average size of government is about twice the Optimal size. Additional results revealed labor to be highly productive, while (additional) capital is not.


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