Algeria's Economic Diversification and Economic Growth: An ARDL Bound Approach Testing

Abstract

Through the implementation of the variables Capital (K) and Human Factor (L), defined respectively by the gross value of fixed capital creation of the gross production and enrollment ratio, in addition to government consumption expenditure. The variable of the oil sector that dominates GDP, this study aims to measure economic diversification's effects on growth in Algeria. The HerfindahlHirshman index is the main economic diversification component. Data sources are provided by the IMF and the National Statistics Office of Algeria (ONS) and cover the period 1980-2015. Our findings indicate a long-term association between growth and economic diversification following the ARDL model's implementation, followed by a negative sign suggesting the inverse relationship between economic growth and low economic diversification in Algeria and confirming its dominance the hydrocarbon industry. The model also shows a 1 percent rise in the Herfindahl-Hirshman index produces a 0.8 percent negative effect similar to the elasticity standard.