World Congress for Middle Eastern Studies

Barcelona, July 19th - 24th 2010


ECONOMIES OF THE MEDITERRANEAN - 2/2: Economic Development in the Mediterranean countries (126) - Panel

· Date: TUE 20, 2.30-4.30 pm

· Institution: CREMed, Center for Research on the Economies of the Mediterranean (Spain) and European Institute, London School of Economics (UK)

· Organizer: Dr. Joan Costa and Prof. Jose Garcia-Montalvo

· Language: English

· Description: “Economic Development in the Mediterranean countries” is one of the two sessions of the panel series on “Economies of the Mediterranean” organized by the CREMed (Center for Research on the Economies of the Mediterranean) and the European Institute in the WOCMES framework.
The objective of the session on <> is to discuss the subject from different perspectives. Specific topics of interest include, but are not limited to, structural reforms and institutional framework (public sector performance, decentralization, governance), economic impact of improving basic education and health services, water management and sanitation.

Chair: Prof. Iván Martín (Instituto Complutense de Estudios Internacionales (ICEI), Madrid, Spain)

Paper presenter: Iman Al-Ayouty (Department of Economics, School of Business, Economics an Communications, The American University in Cairo, Egypt), “Efficiency and Industrial Upgrading from a Global Commodity Chains Perspective: The Case of Textile and Apparel Industry in Egypt and Mexico”
The present study aims to examine the effect of the accession of Egyptian textile and apparel firms to “global commodity chains” on their productive efficiency, industrial upgrading and exports, with special emphasis on those chains governed by European “organizational buyers.” These are the global buyers which the relevant literature classified into “large retailers”, “large department stores”, “branded marketers” and “branded manufacturers.” Such a classification bears upon the pattern of “chain governance” and, hence, the links of the chain that an Egyptian firm may access and its upgrading prospects thereof. The relevance of the European organizational buyers is underscored by Egypt’s being party to a “Cooperation Agreement” and a “Partnership Agreement” with the European Community/Union spanning the period 1977 to date.
The study also aims to compare the case of Egypt against that of Mexico, whose joining of the “North American Free Trade Agreement” (NAFTA) in 1994 fuelled an upsurge in manufactured exports to the United States, especially those of apparel such that Mexico’s share of the U.S. apparel market reached 10%+ in 2000. Moreover, numerous Mexican apparel firms accessed commodity chains governed by U.S. “organizational buyers” and eventually achieved various forms of industrial upgrading. This was coupled with a change in the strategy of the said buyers as many of them curtailed their operations in the U.S. and contracted-out “full package” orders to Mexican firms.
Using a fixed effect model specification, the study is to estimate a production function with a balanced panel of 116 textile and apparel firms (of 100+ employees) in Egypt for the period 2001-2004 with the objective of obtaining total factor productivity estimates. These estimates are then to be regressed on various explanatory variables representing accession to global commodity chains and ensuing industrial upgrading which may have been associated with the terms of the two agreements in question.
The results of the econometric exercise are then to be compared to a set of results obtained from a parallel exercise, employing the same methodology, run on Mexican firms belonging to various manufacturing industries over the period 1993-2000 (Lopez-Cordova, 2003). Moreover, the preferential treatment granted Egypt’s textile and apparel exports under the Cooperation/Partnership Agreements, as well as rules of origin dictated by them, are weighed against their NAFTA counterparts with the objective of determining similarities, differences and implications on firms’ accession to the chains and upgrading prospects thereof, with an eye on drawing lessons of experience relevant to the case of Egypt.

Paper presenter: Salma Soliman (Middlesex University, London, United Kingdom), “Institutional theory and VET development in the South Mediterranean: the Egyptian case”
This paper critically deploys institutional theory in relation to the key policy problem of developing Vocational Education and Training (VET) in Egypt. VET and its development in Mediterranean countries is an important component of the Euro-Mediterranean partnership (Euro-MEDA) since it directly and indirectly influences major economic issues, such as unemployment, trade and migration. Unlike most of the unidimensional studies that approach this problem either from an economic or from an educational perspective, this paper argues for a more comprehensive and contextualised analysis of the problem from an institutional standpoint to address the question of how VET outputs can be improved. Institutional theory identifies four key institutions; the state, financial system, system of skill development and control and trust and authority relations, that provide supportive structures for raising levels of human capital, and the ways in which they interact to do so. These institutions are historically and deeply rooted in individual economies.
I argue that in the Egyptian context key institutions are more notable for their fragmentation, weakness or absence than for their coherence or influence. This increases the challenges faced by the Egyptian government and international donor organisations in developing VET. In such an institutional framework, some programs by international organisations may be more effective than others. Some examples from different projects are explored with reference to, for instance, the European Training Foundation (ETF) and the International Labour Organisation (ILO). The extent to which these programmes may be collectively effective on a national level is questioned. Finally, together with these institutions, I show that the civil society plays a role in VET development through micro-bodies at the grass-roots level of the system. Whilst these to some extent supplement the roles of key institutions, they cannot substitute for them.

Paper presenter: Andreas Savvides (Department of Commerce, Finance and Shipping, Cyprus University of Technology, Lemesos, Cyprus), “Human Capital and Economic Growth in the Mediterranean Countries”
The objective of this paper is to investigate the impact of human capital on the rate of economic growth of a group of Mediterranean economies. The role of human capital in the process of economic growth has been studied widely during the past two decades, especially within the endogenous growth methodology. Research on this question has been summarized in a recent research monograph by A. Savvides and T. Stengos (Human Capital and Economic Growth, Stanford University Press, 2009).
This paper adopts the endogenous growth approach to estimate empirically the contribution of human capital to economic growth of several Mediterranean economies. According to this approach the key factors behind differences in the rate of growth are the following: a country’s initial economic position, the amount of resources devoted to the accumulation of physical capital, the rate of technological improvement, the rate of population growth and the stock of human capital. Unlike the other variables included in the endogenous growth approach, there is no widely accepted empirical definition of the stock of human capital. In this paper, we will proxy a country’s stock of human capital with two measures: (a) the number of years of schooling of a country’s adult population as a proxy for the level of education and (b) each country’s life expectancy at birth as an indicator of the general level of health.
The paper estimates econometrically a model for the determination of the rate of economic growth for a group of twelve Mediterranean economies during the period 1960-2005. The group includes the more developed economies of Southern Europe that are members of the European Union, as well as the developing economies of North Africa and the Middle East. In estimating the model, account will be taken of the different levels of development of the various economies included in the study. The paper discusses and assesses empirically the role that various economic factors play in determining the rate of growth, focusing special attention on the contribution of human capital.