Are the creative exports inducing economic growth? Evidence from Arab countries.

Author:Mohamed, Nashwa Mostafa Ali
Position::Report
 
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Abstract

Using panel co-integration analysis and the Dynamic Ordinary Least Squares (DOLS) estimator, this paper examines the long-run relationship between creative exports and economic growth, in eight Arab countries (Algeria, Bahrain, Jordan, Lebanon, Morocco, Oman, Saudi Arabia, and Tunisia) during the period (2002-2011). The main finding indicates that there is evidence on the long run relationship between creative goods exports and economic growth in the Arab countries sample. Similarly, the creative goods exports have a significant positive effect on economic growth in these countries.

Keywords: creative economy; creative industries; economic growth; Arab countries; panel cointegration.

JEL classification: F140; Z11, O11, O470

  1. INTRODUCTION

    Creative economy is a new dynamic sector in the world trade, and increasingly being recognized as a key force driving economic growth. Unlike the traditional economy, which is driven by the availability of natural recourse, creative economy is driven by knowledge and information. This means that creativity is not a given resource, but it is deeply embedded in a country's social and historical context. So it provides new opportunities for many countries to develop new areas of trade and economic growth.

    The term "creative economy" has been appeared since 2001, in John Howkins' book, which described it as a new relationship between creativity and economics, creates extraordinary value and wealth (UNCTAD, 2008). From the creative class' point of View, Florida (2002) defined the creative economy, as a set of occupations in which people "add economic value through their creativity".

    UNCTAD (2008, 2010) defined creative economy as "the cycles of creation, production, and distribution of goods and services that use creativity and intellectual capital as primary inputs. They constitute a set of knowledge-based activities, focused on but not limited to arts, potentially generating revenues from trade and intellectual property right. They comprise tangible products and intangible intellectual or artistic services with creative content, economic value and market objectives"

    The last definition considers the "creative economy" as an evolving concept Based on creative assets potentially generating economic growth and development. It fosters income-generation, job creation and export earning while promoting social inclusion, cultural diversity and human development. It embraces economic, cultural and social aspects interacting with technology, intellectual property and tourism objectives. It is a set of knowledge-based economic activities with a development dimension and cross-cutting linkages at macro and micro levels to the overall economy. It is a feasible development option calling for innovative, multidisciplinary policy responses and interministerial action. At the heart of the creative economy are the creative industries.

    According to Peters (2010), the conception of the creative economy refers to "those broadly defined design industries and institutions that draw on the individual and increasingly collective resources of creativity, skill and talent that have strong potential for the generation of wealth and job creation through the development and exploitation of intellectual property".

    The first definition of creative industries appeared in the UK creative industries mapping document (DCMS, 1998). And in compatible to Florida (2002), Swenson and Eathington, (2003) considered that creative industries are those that employ large fractions of the creative workforce, invest heavily in research and development, or create and distribute technologically sophisticated or artistic goods and services.

    UNCTAD (2004) referred to creative industries as a group of activities in which it is used intensively and with a particularly high degree of professional specificity. These activities lie at the crossroads between the arts, business and technology. In addition, the concept of creative industries is considered as a development of the cultural industries concept (1), including a move from a strong artistic component to "any activity producing symbolic products with a heavy reliance on intellectual property and for as wide a market as possible".

    Creative industries have been seen as a part of the innovation system, because of their vital role in the adoption of new ideas, producing and selling creative goods and services, and more importantly, providing them as intermediary inputs to other sectors, leading to process or product innovations. Therefore, creative industries indirectly contribute to economic growth by impacting on the innovation capability of the rest of the economy, through processes of sourcing, adoption, imitation, and buyer-supplier cooperation (HM Treasury, 2005; DCMS, 2007; Tether, 2009; Chapain et al., 2010; Berg and Hassink, 2013).

    According to UNCTAD (2010), creative industries are divided into four broad groups: heritage, arts, media and functional creations. Cultural heritage is identified as the origin of all forms of arts and the soul of cultural and creative industries. It includes art crafts, festivals, museums, libraries, exhibitions, etc.). Arts are divided into visual arts (like painting, photography and antiques) and performing arts (like live music, theatre, opera, circus, etc.).While media covers publishing and printed media (e.g. books, press)and audiovisuals (e.g. film). Functional creations comprises more demand-driven and services-oriented industries creating goods and services with functional purposes and divided into: design (interior, graphic, fashion, jewellery, toys); new media (software, video games and digitalized creative content); creative services (architectural, advertising, cultural, recreational, creative research and development (R&D), digital and other related creative services.

    Figures have reflected the worldwide economic importance of creative industries. In 2010, World exports of creative goods totaled $559.5 billion; it more than doubled in only eight years, with an annual growth of 10.7 per cent in the period 20022010. (UNCTAD, 2012).

    The developing countries suffer from many problems, such as high unemployment rate, lack of internal investment, weak export capability, low economic growth and per capita income; thus there is a bad need to a dynamic sector driving their economic growth.

    Characteristics of creative industries introduce the reasons, justifying the importance of these industries for accelerating the economic growth of developing countries, in general, and Arab countries, specifically. In this context, Hendrickson et al. (2011) showed that creative industries may be less dependent on the size of the economy and less vulnerable to external shocks, compared to other sectors. They can help to alleviate the unemployment problem, as they are labor intensive. They depend on using domestic capital and materials that produce differentiated products with high value added. So, they are increasing the export productivity. They include a mix of traditional and modern activities, where the last, especially ICT such as multimedia, can serve the former in delivering their contents to the consumer all over the world.

    In spite of the Sagnia's point of view (2005), that there are major challenges facing developing countries, include the inadequacy of relevant creative capacity to produce and circulate cultural...

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