Morocco: Selected Issues
IMF Staff Country Reports, July 16, 2019
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Bibliographic details
- Published: July 16, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498325905.002
Summary
- The paper studies the potential for well-sequenced labor and product market reforms to play a more important role in promoting growth and job creation in Morocco.
- A Dynamic General Equilibrium model is used to assess the macroeconomic effects of different reform scenarios (isolated, coordinated, or sequenced) that reduce hiring costs and/or firms’ entry costs in the presence of a large informal sector.
- Main quantitative headline: implementing simultaneous reforms in the labor and product markets could add about 2.5 percent of gross domestic product growth and reduce unemployment by about 2.2 percentage points after five years.
Methodology and Scenarios
- Model: Dynamic General Equilibrium model calibrated to account for a large informal sector.
- Reform scenarios evaluated:
- Isolated reforms (labor or product market alone).
- Coordinated reforms (simultaneous labor and product market reforms).
- Sequenced reforms (reforms introduced one after another, reflecting capacity or political economy constraints).
- Policy levers modeled: reductions in hiring costs and reductions in firms’ entry costs.
Key Findings and Quantitative Results
- Coordinated implementation of labor and product market reforms:
- Could add about 2.5 percent of gross domestic product growth after five years.
- Could reduce unemployment by about 2.2 percentage points after five years.
- Sequenced implementation:
- Starting with product market reforms is more effective in boosting output in the short-run.
- Starting with labor market reforms would reduce unemployment faster.
Policy Implications
- Reforms are most effective if executed in a coordinated fashion across labor and product markets.
- When simultaneous implementation is not feasible:
- Prioritize product market reforms to maximize short-run output gains.
- Prioritize labor market reforms to achieve faster reductions in unemployment.
- Consideration of capacity and political economy constraints is important when choosing sequencing.
International Monetary Fund. Middle East and Central Asia Dept. "Morocco: Selected Issues", July 16, 2019.
Content in this bundle
- Morocco: Selected Issues; IMF Country Report No. 19/231; April 30, 2019