Scarcity drives economic development: The effect of energy subsidies on export diversification in the Middle East

Vermeulen, WN

Scarcity drives economic development: The effect of energy subsidies on export diversification in the Middle East

Lookup NU author(s): Dr Wessel Vermeulen

Downloads

Full text for this publication is not currently held within this repository. Alternative links are provided below where available.

Abstract

This chapter proposes to look at the varieties of exported goods from MENA countries to gauge the impact of fossil fuel subsidies on industrial diversification. Subsidies may provide a cost advantage to MENA based firms. However, subsidies can also relieve pressure on producers to innovate towards energy efficiency of goods and production processes. As international demand for energy efficient goods increases, the lack of innovation towards this objective may harm their ability to export to European and other high-income markets. I find that MENA countries with lower subsidies or net-taxes on fossil fuels are able to target their exports specifically to more advanced economies in Europe and the OECD and export more varieties but tend to have fewer export destinations.