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Environmental Politics in the Middle East$
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Harry Verhoeven

Print publication date: 2018

Print ISBN-13: 9780190916688

Published to Oxford Scholarship Online: January 2019

DOI: 10.1093/oso/9780190916688.001.0001

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Scarcity Drives Economic Development

Scarcity Drives Economic Development

The Effect of Energy Subsidies on Export Diversification in the Middle East

Chapter:
(p.193) 8 Scarcity Drives Economic Development
Source:
Environmental Politics in the Middle East
Author(s):

Wessel N. Vermeulen

Publisher:
Oxford University Press
DOI:10.1093/oso/9780190916688.003.0009

This chapter studies 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. The chapter finds that MENA countries with lower subsidies or net-taxes on fossil fuels are able to target their exports specifically to more advanced OECD economies and export more varieties but tend to have fewer export destinations.

Keywords:   Energy Subsidies, Exports, Diversification, Economic development, Innovation

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