Technology Gap and the Mutual Impacts among Economic Gaps in Jordan: An Econometric Analysis 1973-2016

Bashir Kh. Al-Zu'bi, Abdel Baset A. Athamneh


This study aimed to estimate the size and direction of the technology gap in the Jordanian economy and the interrelationship between the economic resource gap, the private savings gap, and the government savings gap. It also aimed to estimate the impact of each of these gaps on economic growth. To achieve the study’s objectives, a simultaneous econometric model was developed including three behavioral equations, seven external variables, and three internal variables. The model was estimated using the method of Two-Stage Least Squares (2SLS). The results showed that the economic resource gap had a positive and statistically significant effect on the real GDP growth rate, in contrast to the effects of the private savings gap and the public savings gap which were negative. The results also provided empirical evidence showing that the relationships between the gaps were reciprocal, not compensatory, as the government savings gap recorded the highest reciprocal effect. In addition, the estimated technology gap showed the size of the technical progress needed to achieve the potential production in case of full capacity utilization. Based on the results, the study recommended that Jordan adopt a prudent fiscal policy to narrow the government savings gap, and thus stimulate economic growth.


Technology gap, Economic gaps, Potential output, Economic growth

Full Text:



Ahmad, S. (2001). Forecasting Dual-Gap for Pakistan, Lahore Journal of Economics, 6(2): 104.‏

Akram-Lodhi, A. H., & Sepehri, A. (2001). Trouble in paradise? Savings and growth in Fiji, 1970-2001, Journal of the Asia Pacific Economy, 6(3): 360-385. ‏

Albala‐Bertrand, J. M. (2007). Relative Capital Shortage and Potential Output Constraint: A Gap Approach, International Review of Applied Economics, 21(2): 189-205. ‏

Bacha, E. L. (1990). A three-gap model of foreign transfers and the GDP growth rate in developing countries, Journal of Development economics, 32(2): 279-296.

Bashayreh, Ala’ (2014). Twin Deficits Controversial, Pros and Cons: An Empirical Study on the Jordanian Economy, Unpublished Ph. D Dissertation, Dept. of Business Economics, the University of Jordan, Amman, Jordan. ‏

Berndt, E. R., & Hesse, D. (1986), Measuring and Assessing Capacity Utilization in the Manufacturing Sectors of Nine OECD Countries, European Economic Review, 30: 961–989.

Blackorby, C., & Schworm, W. (1988). The existence of input and output aggregates in aggregate production functions. Econometrica: Journal of the Econometric Society, 613-643.

Bolbol, A.; Hakimian, H., & Mouradian, A. (2017). Savings in the Lebanese Economy: A Simple Tale for the Post-War 1992-2015 Period. Association of Banks in Lebanon Monthly Bulletin, 2. ‏

‏ Chen, H. C., (2004). Population Age Structure and the Budget Deficit. The Word Bank.

Chenery, H., & Strout, A. (1966). Foreign Assistance and Economic Development, The American Economic Review, 56(4): 679-733.

De Loo, I.G.M., & Soete, L. (1999). The impact of technology on economic growth : some new ideas and empirical considerations, (MERIT Research Memorandum RM 2/99-018) Universiteit Maastricht.

Feldstein, M., & Bacchetta, P. (1991). National saving and international investment. In National saving and economic performance, University of Chicago Press, 201-226.

Frankel, Jeffrey, A., & David H. Romer. (1999). "Does Trade Cause Growth?" American Economic Review, 89 (3): 379-399.

Frankel, J. A.; Romer, D., & Cyrus, T. (1996). Trade and growth in East Asian countries: cause and effect? (No. w5732). National Bureau of Economic Research. ‏

Gujarati, D. N.; Porter, D. C., & Gunasekar, S. (2012). Basic econometrics, Tata McGraw-Hill Education.‏

Hammad, Khalil (1986), "An Aggregate Production Function for Jordan": METU Studies in Development, 13(3,4): 287-298.

Hsiao, C. (1981). Autoregressive modelling and money-income causality detection, Journal of Monetary economics, 7(1): 85-106.

Loayza, N.; Schmidt-Hebbel, K., & Servén, L. (2000). Saving in developing countries: an overview, The World Bank Economic Review, 14(3): 393-414.‏

Luca, M. O., & Spatafora, M. N. (2012). Capital inflows, financial development, and domestic investment: determinants and inter-relationships, International Monetary Fund.

Misztal, P. (2011). The Relationship between Savings and Economic Growth in Countries with Different Level of Economic Development (Wspólzaleznosci miedzy oszczednosciami wzrostem gospodarczym w krajach o róznym poziomie rozwoju gospodarczego). Finansowy Kwartalnik Internetowy e-Finanse, 7(2): 17-29.‏

Murphy, R. G. (1984). Capital mobility and the relationship between saving and investment rates in OECD countries, Journal of international Money and Finance, 3(3): 327-342. ‏

‏ Nelson, R. A. (1989). On the measurement of capacity utilization. The Journal of Industrial Economics, 273-286.

Ngwenya, H., & Hagmann, J. 2009. Facilitation for change: Triggering emancipation and innovation in rural communities in South Africa. In: Scoones, I. & Thompson, J. (eds). Farmer first revisited: Innovation for agricultural research and development. Oxford, UK: ITDG Publishing. 220 – 228.

RA, K. D. R. (2019). Technology and Total Factor Productivity (TFP) policy recommendations for economic growth in the developing world. IJAR, 5(10): 31-34.‏

Ranaweera, T. (2003). Alternative paths to structural adjustment in a three-gap Model: The Case of Uzbekistan. Post-Communist Economies, 15(4): 595-611.‏

Roeger, W., & Ecfin, D. (2006). The production function approach to calculating potential growth and output gaps. In Estimates for EU Member States and the US “Paper prepared for the workshop on Perspectives on potential output and productivity growth, organized by Banque de France and Bank of Canada.

Sepehri, A.; Moshiri, S., & Doudongee, M. (2000). The foreign exchange constraints to economic adjustment: the case of Iran, International Review of Applied Economics, 14(2): 235-251.

‏ Sepehri, A., & Akram‐lodhi, A. H. (2005). Transition, savings and growth in Vietnam: a three‐gap analysis. Journal of International Development, The Journal of the Development Studies Association, 17(4): 553-574. ‏

Serry, E. A. (1987), A Macro Econometric Model for The Egyptian Economy, Specification, Estimation and Simulation Under Alternative Principles of Economics, Clark University, Worcester, Massachusetts.

Thanoon, M. A. M., Baharumshah, A. Z., & Rahman, A. A. A. (2005). Malaysia: from economic recovery to sustained economic growth, Journal of Post Keynesian Economics, 28(2): 295-315. ‏

Ullah, S., Azim, P., & Siddique, W. (2012). Impact of Foreign Aid Volatility on Economic Growth in Pakistan.

Wang, Q., Nong, Y. (1985). Studying Technological Progress and its Impact on Economic Growth in China, The 3rd International Conference of the System Dynamics Society 1985 – Keystone, CO USA: 988-1002.

Zhang, H., & Chen, H. (2012). The economic Transition in China at the Crossroads? A Perspective on Three-Gap Analysis? Journal of Cambridge Studies, 7(1): 43-61.


  • There are currently no refbacks.