Middle East

2024
Martin, D.A., 2024. Women Seeking Jobs with Limited Information: Evidence from Iraq.Abstract

Do women apply more for jobs when they know the hiring probability of female job seekers directly from employers? I implemented a randomized control trial and a double-incentivized resume rating to elicit the preferences of employers and job seekers for candidates and vacancies in Iraq. The treatment reveals the job offer rate for women, calculated using the employers’ selection of women divided by the total number of female candidates. After revealing the treatment, the women applied for jobs by three more percentage points than the men in the control group. This paper highlights the value of revealing employers’ preferences to improve the match between female candidates and employers when women underestimate the chances of finding a job. 

2024-02-cid-rfwp-157-women-seeking-jobs-iraq.pdf
2023
Hausmann, R., et al., 2023. Towards a Sustainable Recovery for Lebanon’s Economy.Abstract

Lebanon’s current economic crisis ranks among the worst in recent history. GDP has collapsed by 38% in real terms. The Lebanese lira, which was fixed to the dollar in 1997, has lost more than 98% of its value on the parallel market. The government has defaulted on its debt, and depositors are unable to access their funds held at commercial banks. Consolidated public sector debt, including both government debt and commercial banks’ claims on the Banque du Liban (BdL), represents more than seven times the current GDP. Public services delivery has crumbled. In short, the country is undergoing a debt crisis, a banking crisis, a currency crisis, and a growth collapse. Four years into the crisis, a resolution remains elusive, and each passing day increases the economic and social burdens faced by the population. 

Given the increasing cost of delaying a resolution, we propose a strategy for Lebanon’s economic recovery that addresses all the dimensions of the crisis while recognizing the need to rapidly kick-start the economic recovery. 

Learn more about the Growth Lab's research project on Lebanon. 

Executive Summary: EnglishArabic | French

2023-11-cid-wp-439-lebanon-sustainable-recovery.pdf exec-summary-2023-11-cid-wp-439-lebanon-sustainable-recovery.pdf arabic-exec-summary-2023-11-cid-wp-439-lebanon-sustainable-recovery.pdf french-exec-summary-2023-11-cid-wp-439-lebanon-sustainable-recovery.pdf
COVID-19 and emerging markets: A SIR model, demand shocks and capital flows
Çakmaklı, C., et al., 2023. COVID-19 and emerging markets: A SIR model, demand shocks and capital flows. Journal of International Economics , 145. Publisher's VersionAbstract
We quantify the macroeconomic effects of COVID-19 for a small open economy. We use a two-country framework combined with a sectoral SIR model to estimate the effects of collapses in foreign demand and supply. The small open economy (country one) suffers from domestic demand and supply shocks due to its own pandemic. In addition, there are external shocks coming from the rest of the world (country two). Aggregate exports of the small open economy decline when foreign demand goes down, and aggregate imports suffer from lockdowns in the rest of the world. We calibrate the model to Turkey. Our results show that the optimal policy, which yields the lowest output loss and saves the maximum number of lives, for the small open economy, is an early and globally coordinated full lockdown of 39 days.
2022
O'Brien, T., et al., 2022. What Will It Take for Jordan to Grow?.Abstract
This report aims to answer the critical but difficult question: "What will it take for Jordan to grow?" Though Jordan has numerous active growth and reform strategies in place, they do not clearly answer this fundamental question. The Jordanian economy has experienced more than a decade of slow growth. Per capita income today is lower than it was prior to the Global Financial Crisis as Jordan has experienced a refugee-driven population increase. Jordan’s comparative advantages have narrowed over time as external shocks and responses to these shocks have changed the productive structure of Jordan’s economy. This was a problem well before the country faced the COVID-19 pandemic. The Jordanian economy has lost productivity, market access, and, critically, the ability to afford high levels of imports as a share of GDP. Significant efforts toward fiscal consolidation have further constrained aggregate demand, which has slowed non-tradable activity and the ability of the economy to create jobs. Labor market outcomes have worsened over time and are especially bad for women and youth. Looking ahead, this report identifies clear and significant opportunities for Jordan to strengthen new engines of export growth that would enable better overall job creation and resilience, even amidst the continued unpredictability of the pandemic. This report argues that there is need for a paradigm shift in Jordan’s growth strategy to focus more direct attention and resources on activating “agents of change” to accelerate the emergence of key growth opportunities, and that there are novel roles that donor countries can play in support of this.
2022-03-cid-wp-411-what-will-it-take-for-jordan-to-grow-final.pdf
2021
Lopesciolo, M., Muhaj, D. & Pan, C., 2021. The Quest for Increased Saudization: Labor Market Outcomes and the Shadow Price of Workforce Nationalization Policies.Abstract
Few countries have embraced active labor market policies to the same extent as Saudi Arabia. In the aftermath of the Arab Spring, the imperative of increasing Saudi employment became paramount. The country faced one of the highest youth unemployment rates in the world while over 80 percent of its private sector consisted of foreign labor. Since 2011, a wave of employment nationalization efforts has been mainly implemented through a comprehensive and strictly enforced industry and firm specific quota system known as Nitaqat. This paper assesses the employment gains as well as the costs and unintended consequences resulting from Nitaqat and related policies between 2011 and 2017. We find that while job nationalization policies generated significant initial gains in Saudi employment and labor force participation, the effects were heterogeneous across workers, firms and sectors. Moreover, our analysis suggests that the resulting unintended consequences far outweighed the benefits over time generating a less cost-effective and productivity inhibiting labor market composition.
 
2021-07-cid-wp-132-saudi-labor-market-outcomes.pdf
Hani, F. & Lopesciolo, M., 2021. Understanding Saudi Private Sector Employment and Unemployment.Abstract

This paper analyzes the changes in Saudi employment and unemployment between 2009 and 2018 and argues that a supply-demand skill mismatch exacerbated by insufficient job creation, and prevalent Saudi preferences and beliefs about employment underpin the high unemployment problem that coexists with low Saudi employment in the private sector in the country.

2021-03-cid-fellows-wp-131-saudi-employment.pdf
2020
Cortes, P., Kasoolu, S. & Pan, C., 2020. Labor Market Nationalization Policies and Firm Outcomes: Evidence from Saudi Arabia.Abstract
Saudi Arabia is home to the world’s third largest migrant population. Under mounting pressure to increase the private sector employment of Saudis during the last decade, a series of nationalization policies on the labor force have been imposed since late 2011. In this paper, we study how the first nationalization policy, Nitaqat, affected the overall labor market and non-oil firms in the private sector, especially exporting firms. Our rich and novel data allow us to assess the effect of the policy on a wide set of outcomes: employment decisions by composition and size, the output and productivity of exporting firms, labor costs, and exit from the market. Using a difference-in-difference analysis, we compare the 2011 to 2012 change in outcomes between firms above and firms below the threshold required for the minimum share of Saudi workers in a firm. Our results suggest that the policy succeeded in encouraging firms to increase the share of Saudis in private firms. It also increased the share of Saudi women in the workforce, suggesting that the policy had a positive effect on increasing female labor force participation. However, these gains came at a very high cost to firms: our findings suggest that the policy led to a reduced firm size, reduced productivity and output of exporting firms, increased wage bill, increased share of low-skilled Saudi workers, and higher firm exit rates.
2020-07-cid-wp-381-saudi-policies-outcomes.pdf
2019
Hausmann, R., et al., 2019. A Roadmap for Investment Promotion and Export Diversification: The Case of Jordan.Abstract

Jordan faces a number of pressing economic challenges: low growth, high unemployment, rising debt levels, and continued vulnerability to regional shocks. After a decade of fast economic growth, the economy decelerated with the Global Financial Crisis of 2008-09. From then onwards, various external shocks have thrown its economy out of balance and prolonged the slowdown for over a decade now. Conflicts in neighboring countries have led to reduced demand from key export markets and cut off important trade routes. Foreign direct investment, which averaged 12.7% of gross domestic product (GDP) between 2003-2009, fell to 5.1% of GDP over the 2010-2017. Regional conflicts have interrupted the supply of gas from Egypt – forcing Jordan to import oil at a time of record prices, had a negative impact on tourism, and also provoked a massive influx of migrants and refugees. Failure to cope with 50.4% population growth between led to nine consecutive years (2008-2017) of negative growth rates in GDP per capita, resulting in a cumulative loss of 14.0% over the past decade (2009-2018). Debt to GDP ratios, which were at 55% by the end of 2009, have skyrocketed to 94%.

Over the previous five years Jordan has undertaken a significant process of fiscal consolidation. The resulting reduction in fiscal impulse is among the largest registered in the aftermath of the Financial Crises, third only to Greece and Jamaica, and above Portugal and Spain. Higher taxes, lower subsidies, and sharp reductions in public investment have in turn furthered the recession. Within a context of lower aggregate demand, more consolidation is needed to bring debt-to-GDP ratios back to normal. The only way to break that vicious cycle and restart inclusive growth is by leveraging on foreign markets, developing new exports and attracting investments aimed at increasing competitiveness and strengthening the external sector. The theory of economic complexity provides a solid base to identify opportunities with high potential for export diversification. It allows to identify the existing set of knowhow, skills and capacities as signaled by the products and services that Jordan is able to make, and to define existing and latent areas of comparative advantage that can be developed by redeploying them. Service sectors have been growing in importance within the Jordanian economy and will surely play an important role in export diversification. In order to account for that, we have developed an adjusted framework that allows to identify the most attractive export sectors including services.

Based on that adjusted framework, this report identifies export themes with a high potential to drive growth in Jordan while supporting increasing wage levels and delivering positive spillovers to the non-tradable economy. The general goal is to provide a roadmap with key elements of a strategy for Jordan to return to a high economic growth path that is consistent with its emerging comparative advantages.

2020-01-cid-wp-374-roadmap-jordan-revised-march.pdf
Revised March 2020
Kasoolu, S., et al., 2019. Female Labor in Jordan: A Systematic Approach to the Exclusion Puzzle.Abstract

Women in Jordan are excluded from labor market opportunities at among the highest rates in the world. Previous efforts to explain this outcome have focused on specific, isolated aspects of the problem and have not exploited available datasets to test across causal explanations. We develop a comprehensive framework to analyze the drivers of low female employment rates in Jordan and systematically test their validity, using micro-level data from Employment and Unemployment Surveys (2008-2018) and the Jordanian Labor Market Panel Survey (2010-2016). We find that the nature of low female inclusion in Jordan’s labor market varies significantly with educational attainment, and identify evidence for different factors affecting different educational groups. Among women with high school education or less, we observe extremely low participation levels and find the strongest evidence for this phenomenon tracing to traditional social norms and poor public transportation. On the higher end of the education spectrum – university graduates and above – we find that the problem is not one of participation, but rather of unemployment, which we attribute to a small and undiversified private sector that is unable to accommodate women’s needs for work and work-family balance.

Listen to a podcast interview with author Semiray Kasoolu about her research on women and labor force exclusion in Jordan

2019-10-cid-wp-365-female-labor-jordan.pdf jordan-policy-brief-v11.pdf
Hausmann, R., et al., 2019. Jordan: The Elements of a Growth Strategy.Abstract

In the decade 1999-2009, Jordan experienced an impressive growth acceleration, tripling its exports and increasing income per capita by 38%. Since then, a number of external shocks that include the Global Financial Crisis (2008-2009), the Arab Spring (2011), the Syrian Civil War (2011), and the emergence of the Islamic State (2014) have affected Jordan in significant ways and thrown its economy out of balance. Jordan’s debt-to-GDP ratio has ballooned from 55% (2009) to 94% (2018). The economy has continued to grow amidst massive fiscal adjustment and balance of payments constraints, but the large increase in population – by 50% between 2008 and 2017 – driven by massive waves of refugees has resulted in a 12% cumulative loss in income per capita (2010-2017). Moving forward, debt sustainability will require not only continued fiscal consolidation but also faster growth and international support to keep interest payments on the debt contained. We have developed an innovative framework to align Jordan’s growth strategy with its changing factor endowments. The framework incorporates service industries into an Economic Complexity analysis, utilizing the Dun and Bradstreet database, together with an evaluation of the evolution of Jordan’s comparative advantages over time. Combining several tools to identify critical constraints faced by sectors with the greatest potential, we have produced a roadmap with key elements of a strategy for Jordan to return to faster, more sustainable and more inclusive growth that is consistent with its emerging comparative advantages.

2019-02-28-cid-wp-346-jordan-growth-strategy-revised.pdf
2017
Sanctions and Export Deflection: Evidence from Iran
Haidar, J.I., 2017. Sanctions and Export Deflection: Evidence from Iran. Economic Policy , 32 (90) , pp. 319–355. Publisher's VersionAbstract
Do export sanctions cause export deflection? Data on Iranian non-oil exporters between January 2006 and June 2011 shows that two-thirds of these exports were deflected to non-sanctioning countries after sanctions were imposed in 2008, and that at this time aggregate exports actually increased. Exporting firms reduced prices and increased quantities when exporting to a new destination, however, and suffered welfare losses as a result.
economic_policy_haider_april_2017.pdf
Haidar, J.I., 2017. Sanctions and Export Deflection: Evidence from Iran.Abstract

Do export sanctions cause export deflection? Data on Iranian non-oil exporters between January 2006 and June 2011 shows that two-thirds of these exports were deflected to non-sanctioning countries after sanctions were imposed in 2008, and that at this time aggregate exports actually increased. Exporting firms reduced prices and increased quantities when exporting to a new destination, however, and suffered welfare losses as a result.

working-paper-80.pdf
2016
Diwan, I. & Haidar, J.I., 2016. Do Political Connections Reduce Job Creation? Evidence from Lebanon.Abstract
Using firm-level census data, we determine how politically-connected firms (PCFs) reduce job creation in Lebanon. After observing that large firms account for the bulk of net job creation, we find that PCFs are larger and create more jobs, but are also less productive, than non-PCFs in their sectors. On a net basis, at the sector-level, each additional PCF reduces jobs created by 7.2% and jobs created by non-PCFs by 11.3%. These findings support the notion that politically-connected firms are used for clientelistic purposes in Lebanon, exchanging privileges for jobs that benefit their patrons’ supporters.
diwan-haidar-rfwp70.pdf
2012
Diwan, I., 2012. A Rational Framework for the Understanding of the Arab Revolutions.Abstract

The paper argues that demise of the autocratic bargain in the Arab world, ushered by the uprisings of 2010-11, has been driven by a split in the ruling class. The bargain authoritarians struck with their societies in the recent decade is best characterized as a repressive regime that relied on a narrow elite base. The paper explores the dynamic factors that have affected this bargain over time, and in particular, the increased autonomy of the middle class, the rise of crony capitalism, the increased popularity of Political Islam among the middle class, and the "indignities" associated with unpopular foreign alliances. The recent political changes are interpreted as the moment when the middle class, traditionally allied with the autocrats, and affected by these latent pull and push factors, preferred to "tip" its support to a transition towards a democratic settlement. The 3-player model I develop is shown to explain the characteristics of the ongoing Arab Spring and of the key future challenges facing the region better than the classical autocratic bargain model.

cid_working_paper_237.pdf
2010
Export Diversification in Algeria
Hausmann, R., Klinger, B. & López-Cálix, J.R., 2010. Export Diversification in Algeria. In Trade Competitiveness of the Middle East and North Africa. Washington, DC. Washington, DC: The World Bank, pp. 63-101.Abstract

This chapter applies new methodologies to examine the history of and future opportunities for export diversification in Algeria. The first section examines Algeria’s productive structure, which is highly concentrated in the hydrocarbons sector. It shows that this pattern of specialization is inconsistent with the country’s endowment of hydrocarbon resources. The lack of export diversification is suggestive of an inefficient distortion, reversal of which should be a clear policy priority.

The second section reviews some of the traditional explanations for a lack of export diversification in an oil-exporting country and shows that these explanations do not seem to hold for Algeria. It offers an alternative explanation, based not on macroeconomic volatility or real exchange rate appreciation but on the specificity of productive capabilities in the oil sector and their substitutability to other activities. This explanation underlies the notion of a “product space,” in which structural transformation occurs.

The third section introduces a new methodology to export diversification in Algeria, which is shown to be specialized in a highly peripheral part of the product space. Even activities that compose the non-oil export basket are highly peripheral in the product space, which helps explain the severe lack of export diversification.

The fourth section applies product space data to Algeria’s industrial strategy, using the methodology to identify high-potential export sectors. This data-driven approach has the benefit of systematically scanning the entire set of potential export goods using an empirically validated methodology. It complements other more qualitative and contextual approaches. This section uses the same methodology to review the sectors already identified by the Algerian government in the new industrial policy.

The last section discusses the policy implications of this analysis. A wide variety of methodologies can be used to generate lists of high potential export sectors; more difficult is determining what to do with such lists. The section offers a few specific policy recommendations and discusses some best practices. But the fact that most required public goods and constraints to investment are sector specific means that recommendations cannot be made at the macro level.

tradecompetitiveness_in_mena.pdf