Determinants of Total Factor Productivity (TFP) in Rich Natural Resource Countries: Application to Saudi Arabia Using the Panel ARDL Model

This study examines the determinants of Total Factor Productivity (TFP) across 24 manufacturing sectors in Saudi Arabia from 2005 to 2021, employing the Pooled Mean Group (PMG) estimation within a panel ARDL framework. The findings reveal that, in the long run, foreign direct investment (FDI), human capital development, credit to the manufacturing sector, and trade openness significantly enhance TFP. Conversely, inflation and heavy reliance on imported information and communication technology (ICT) goods exert a negative impact. In the short run, however, only FDI and trade openness show significant effects, with FDI initially exerting a negative influence that reverses to a positive one over time. These results underscore the crucial role of long-term strategies that focus on investment, human capital development, financial sector growth, and trade policies in fostering productivity growth. The sector-level results provide policymakers with actionable insights to design targeted interventions that support Saudi Arabia’s industrial transformation goals.