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Before the Covid19- crisis, Dubai’s economy was internationally ranked as one of the most competitive economies in the world with a state of- art infrastructure and one of the best in terms of ease-of-doing business. However, in 2016, Dubai’s economy slowed down and entered a period of modest growth with an average growth rate of %2.6 between that period and 2019, compared to an average growth rate of %4.1 between 2011 and 2015. Growing below the potential rate indicates that Dubai’s level of production is at lower levels given its ability. A deep-economic analysis suggests that Dubai’s growth has been mainly driven by one factor of production, labor, and to a lesser extent by capital. The growth in labor productivity in 2019-2015 slowed down with the sluggish growth in the rate of capital formation. It is evident that employment expansion was the main driving force behind rising growth rates; a structural impediment to higher value-added
economic activity in Dubai’s workforce structure. The Covid19- pandemic has caused great disruption to normal economic and labor market activity. To sustained economic growth, innovations and new technologies are necessary yet they tend to threaten existing labor skills. Despite its labor-saving nature, history demonstrates that new technology is not the enemy of employment. Technology and automation substitute labor but also complements labor service increasing productivity and output in ways that cause a higher demand for workers. Technological disruptions could create new occupations as well as erase other, that’s a fact. If the right incentives are provided, the fourth industrial revolution could promise Dubai’s economy significant gains in productivity and welfare. Policies that embrace AI and automation, and capital deepening should be adopted. In contrast, policies that slow down the deployment of automation and AI would be counterproductive.
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