Oil and The Libyan Economy
Etelawi, Abdulrazag Mohamed Ali
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Oil is the single most important resource in the Libyan economy. In order to explore the extent to which oil dominates the development of Libyan national income, this study covers the period time from 1990 to 2009. This study found that development sustainability (investment divided by GDP) averaged 0.38 over the study period, which indicates a low level of sustainable development. Carbon dioxide emissions provide another indicator of sustainable development. The ratio of carbon dioxide was 9.07, which is much higher compared to other countries in the Middle East and North Africa. The Environment Domestic Product (EDP) provides yet another measure. The EDP increased sharply from $24.23 billion to $45.87 billion over the study period. These indicators suggest that policy makers did not consider the depletion of oil resources and the effect on the environment in their planning process or at least did not place a high level of concern on this issue. At the same time, Libyan authorities encouraged the use the nation's oil resources to promote economic development. Since oil is the primary source of income for the Libyan economy, it is important to determine the economic factors associated with this resource. This study attempts to assess the relationship between economic growth, domestic consumption, labor, capital, and exports for the period 1980 to 2012. All of the model's coefficients were significant at the 0.05 level except for the log of labor, which was significant at the 0.06 level. The signs associated with the coefficients were consistent with the previously presented theory. Elasticity estimates indicate that when capital increases one percent, Gross Domestic Product (GDP) increases 0.22 percent. Similarly a one percent increase in labor results in a GDP increase of 0.11 percent, a one percent increase in consumption increases GDP increases 0.22 percent and a one percent in exports increases GDP 0.13 percent. It is critically important to increase the country's Gross Domestic Product (GDP) in order to increase standard of living, decrease unemployment, and improve Libyan economy activities.