From oil reliance to diversified growth: The role of mega events and large-scale projects in two resource-rich economies

This study investigates the impact of mega events and large-scale projects on economic diversification and sustainability in two Gulf Cooperation Council countries, namely Qatar and Saudi Arabia from 1996 to 2022. While these countries have emphasized the role of economic diversification as a crucial aspect to mitigate their dependence on hydrocarbons, the extent of their success in achieving this goal remains relatively unknown. This study employs advanced econometric methods, including an Autoregressive Distributed Lag model with structural breaks and a time-varying Granger causality analysis, to explore the impact of mega events on economic growth and diversification. We find that government expenditure positively affects GDP growth, especially after the announcement of mega events. Interestingly, this positive effect is more pronounced in the non-oil sector compared to the oil sector. Thus, our results demonstrate how these events affect a country’s diversification and sustainability efforts, ultimately reducing the reliance on oil and gas revenues. We also find that labor and capital accumulation play a more substantial role in fostering economic growth in the non-oil sector compared to the oil sector. Our results are of paramount importance to policymakers and stakeholders with several policy implications.