Driving Factors of Economic Diversification in Resource-Rich Countries via Panel Data Evidence

Mathematical Modeling of Physical Capital Diffusion Using a Spatial Solow Model: Application to Smuggling in Venezuela

This study proposes a mathematical modeling approach for the physical capital diffusion through the borders of countries. Physical capital is considered a crucial variable for the economic growth of a nation. Here, we use an extension of the economic Solow model to describe how smuggling affects the economic growth of countries. In particular, we focus on the situation in Venezuela from 2012 to 2015. In this regard, we rely on a nonconcave production function instead of the classical Cobb–Douglas production function. Moreover, we investigate the effect of different physical capital fluxes on economic growth. The physical capital diffusion through the borders of a country is modeled based on a parabolic partial differential equation describing the dynamics of physical capital and boundary conditions of the Neumann type. Smuggling is present at numerous borders between countries and may include fuel, machinery, and food. This smuggling through the borders places challenges on a particular country’s economy. The smuggling problem usually is related to a non-official exchange rate different from the official rate or subsidies. We study the effect of smuggling on the physical capital of a country using an extended Solow model. Numerical simulations are obtained using an explicit finite difference scheme describing how the physical capital diffusion through the border of a country affects its economic growth. The study of physical capital is a paramount aspect of the economic growth of several countries. The results show that when boundary conditions of Neumann type are different from zero, the dynamics of the physical capital differ from the classical economic behavior observed in the classical spatial Solow model without physical capital flux through the borders of countries. In particular, the numerical results show that the physical capital of a country decreases faster as the flux increases on the boundaries. Thus, we can conclude that avoiding smuggling through the frontiers is a crucial factor affecting economic growth.

A Transformative State in the Wake of COVID-19: What Is Needed to Enable Innovation, Entrepreneurship, and Education in Qatar?

Economic diversification is vital in achieving sustainable economic development, especially for countries relying on nonrenewable natural resources, such as oil and gas, in the case of the Gulf Cooperation Council (GCC) countries. Moreover, the global crisis caused by the COVID-19 pandemic underscored the significance of boosting resilience to adverse shocks. Indeed, the pandemic highlighted the need to promote nonhydrocarbon sectors by strengthening the fundamental pillars of the knowledge-based economy: ICT, innovation, R&D, education, entrepreneurship, and the economic and institutional regime. The COVID-19 pandemic has also shown how important it is to mobilize these pillars in record time. Like the other GCC countries, Qatar is seen as a transformative state, suggesting that, although oil and gas provide its primary export revenue, the government has also pushed to diversify its economy toward a knowledge-based one. Indeed, in 2019, hydrocarbons dominated Qatar’s economy, accounting for 90% of government income and 80% of export profits. However, this reliance exposes Qatar to fluctuations in the global oil and gas markets. Accordingly, economic diversification has come to the top of the government’s priority list. Preceding the COVID-19 pandemic, Qatar was already in the middle of an economic transition. The economic crisis caused by the pandemic and the drop in oil prices prompted the Qatari government to increase its diversification efforts. Qatar has a solid basis for transitioning to a knowledge-based economy based on its macroeconomic stability, suitable growth rates, and good governance. However, Qatar confronts several challenges in implementing the structural changes necessary for this transition. This paper has three objectives. Firstly, it aims to present the pillars of the knowledge-based economy and their link to the COVID-19 pandemic. Secondly, the paper aims to analyze the present state of the knowledge-based economy in Qatar, including its strengths, drawbacks, and its prospect for the future. Finally, the paper presents some structural reform recommendations to enable innovation, entrepreneurship, and education in Qatar.