Since the 1980s, there has been growing recognition among developing countries that an essential foundation for sustainable growth is capital investment, both public and private. While Iraq is an oil-rich country, with substantial oil revenue, only a small proportion of it has been allocated to importing the capital that is most needed, while the rest has mainly been used for consumption purposes. The effects of the oil-driven state development, conflicts, sanctions, high unemployment and delayed reforms have significantly shaped Iraq’s economy and limited the potential for private-sector-led growth over the past 40 years. This conclusion is worrying for a country like Iraq, which has shown some downward trends in private and public investment, both in the total amounts and relative to GDP. This study, the first of its kind, empirically assesses the pattern of domestic private investment in Iraq and its key determinants over the past four decades. It also examines the issue of the complementarity (crowd-in effect) or substitutability (crowd-out effect) between public capital and private investment in the trend in economic growth. Finally, it evaluates the determinants of public investment, to reveal the indirect impacts oil revenue has on private investment through the increasing of public investment. The thesis employs time-series data and annual datasets covering 1970-2010. Both the ADF and the PP unit root tests are employed to test for the stationarity of the data. Johansen’s cointegration is used to establish the long-run equilibrium relationship among the variables in the models. The VECM is also utilized to examine the short-run dynamics between the variables. The main empirical results support the accelerator principle hypothesis of a positive relationship between GDP and private investment. The McKinnon-Shaw hypothesis is, however, not verified in the case of Iraq but there is some evidence that private investment is crowded in by public investment, and that oil revenue has an indirect effect on private investment.

In this study an attempt has been made to explore the role of technology transfer in the economic growth of Iraq, through the change in the technology itself for the period 1960-1978. For this purpose the economy was disaggregated into seven sectors. The experience of developed countries has shown that technical change is one of the most important factors of economic growth alongside, or even overshadowing, such factors as labour and capital. In the light of technology transfer, developing countries have the advantage of introducing high levels of advancement of knowledge which can be used to induce domestic technical change at later stages. Technical change is normally defined as a shift in the production function, and for this reason two forms of production function were estimated and tested, i. e. the constant elasticity of substitution and the Cobb-Douglas function. Also two specifications (constant and variable) were assigned to technical change. To validate the use of these, statistical tests were conducted to establish the optimum fit. Then the selected form was used to simulate output levels for comparison with actual figures. The techniques used for estimation are both linear and non-linear. Data used are time series in real terms of capital stock and output, as well as number of persons employed. Furthermore in order to judge the importance of technical change to the growth of output on aggregate and sectoral levels, as regards economic growth, comparisons were drawn with existing data from other developed and developing countries, including centrally planned economies.