What constrains growth in Algeria? a diagnostic approach

Abstract

The growth diagnostic approach crafted by Hausmann, Rodrik and Velasco (2005) provides a framework for formulating hypotheses on what may be constraining a country’s growth. In this context, this paper aims at highlighting the methodology of such an approach with an application to Algeria. Our findings show that low private returns to economic activities due to micro risks
(high taxes, weak contract enforcement & property rights, electricity shortcomings, corruption…), and insufficient access to finance, are a critical binding’s constraint to growth in the country. However, unlocking Algeria’s growth potential requires that economic policymakers should prioritize their intervention on the removing of such constraints.