The nexus between construction investment and economic development: evidence from MENA countries

Although the literature is replete with studies that signify the role of the construction industry in economic development, the complexity of the relationship still deserves attention and calls for a regional perspective as well as more robust empirical evidence. To fill this gap, we scrutinise the nexus between construction investment and economic development for the Middle East and North Africa (MENA) region by employing second generation panel data modelling tools. We do so with a focus on top ten developing economies in the region, namely, Saudi Arabia, Turkey, Iran, United Arab Emirates, Egypt, Iraq, Qatar, Algeria, Kuwait, and Morocco, between 1970 and 2019. We find that there is an inverted U-shaped pattern, in line with Bon's proposition, implying that the share of construction investments started to decline at some point in time as the economic growth reached a certain threshold. We argue that MENA countries should reconsider their construction-induced growth policies and incorporate alternative options supported by innovative and environmental-friendly technologies to attach much more importance to the role of construction in future economic development plans.