Explaining Growth in an Emerging Market

We explore whether, and to what extent, financial deepening, human capital and information technology could explain the rapid economic growth that the United Arab Emirates (UAE) has experienced in recent years. We find compelling evidence that these factors, particularly human capital and information technology, are indispensable ingredients for promoting economic growth but only over the long-run. Consistent with the underlying theory, our results fail to support significant short-run growth gains from any of the growth factors. Together, these results imply that programs to invigorate the education system and the technological infrastructure in the UAE represent an effective growth strategy for the country, although such efforts must persist even in the absence of any quick growth benefits.