Labor Market Nationalization Policies and Exporting Firm Outcomes: Evidence from Saudi Arabia / Patricia Cortés, Semiray Kasoolu, Carolina Pan.

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Cortés, Patricia

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w29283.Publication details: Cambridge, Mass. National Bureau of Economic Research 2021.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: In the last decade, Gulf countries have imposed hiring quotas to promote the participation of natives in the private sector and address high levels of unemployment, particularly among women and the youth. This paper explores how one such policy, Nitaqat in Saudi Arabia, affected the outcomes of exporting firms, the most productive sector of the non-oil economy. We find that whereas the policy was successful in increasing the employment of Saudi nationals by these firms, it came at a high cost. In the year following the announcement of the policy, relative to firms above the quota, firms below the quota were 1.5 percentage points more likely to exit the market, 7 percentage points less likely to export, and conditional on exporting, the value of their exports fell by 14 percent. Additionally, surviving treated firms reduced their labor force by 10 percent. We find that to comply with the policy, firms hired mostly lower-wage, low-skilled Saudis. The policy doubled the share of women in treated firms. Importantly, we find that these short-term effects persisted for at least three years after the policy's implementation.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w29283 (Browse shelf(Opens below))	Not For Loan

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September 2021.

In the last decade, Gulf countries have imposed hiring quotas to promote the participation of natives in the private sector and address high levels of unemployment, particularly among women and the youth. This paper explores how one such policy, Nitaqat in Saudi Arabia, affected the outcomes of exporting firms, the most productive sector of the non-oil economy. We find that whereas the policy was successful in increasing the employment of Saudi nationals by these firms, it came at a high cost. In the year following the announcement of the policy, relative to firms above the quota, firms below the quota were 1.5 percentage points more likely to exit the market, 7 percentage points less likely to export, and conditional on exporting, the value of their exports fell by 14 percent. Additionally, surviving treated firms reduced their labor force by 10 percent. We find that to comply with the policy, firms hired mostly lower-wage, low-skilled Saudis. The policy doubled the share of women in treated firms. Importantly, we find that these short-term effects persisted for at least three years after the policy's implementation.