Why Has Unemployment in Algeria Been Higher than in MENA and Transition Countries?
IMF Working Papers, August 1, 2007
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Bibliographic details
- Authors: Kangni R Kpodar
- Published: August 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451867749.001
Overview
- Author: Kangni R Kpodar
- Date: August 1, 2007
- Scope: Analysis of determinants of labor market performance in Algeria using panel data on a sample of MENA and transition countries for 1995- 2005.
- Series: Working Paper No. 2007/210
- Pages: 30
Main findings
- Lower growth in labor productivity in Algeria is associated with higher unemployment than the sample average.
- Recent positive terms of trade shocks have helped Algeria reduce the unemployment differential relative to the sample average.
- Labor market rigidities do not seem to explain why unemployment is higher in Algeria than in other countries.
- Labor taxation does not seem to explain why unemployment is higher in Algeria than in other countries.
- The results are robust to various panel econometric methods and instrumental variable estimates.
Methodology and robustness
- Empirical approach: Panel data estimation on a sample of MENA and transition countries for 1995- 2005.
- Robustness: Findings hold across various panel econometric methods and instrumental variable estimates.
Policy implications
- Policies aimed at raising labor productivity growth could help reduce Algeria’s unemployment differential with MENA and transition country peers.
- Terms of trade developments materially affect the unemployment differential; policies that mitigate adverse terms of trade shocks or capitalize on positive shocks can influence labor market outcomes.
- Given that measured labor market rigidities and labor taxation do not account for Algeria’s higher unemployment, policy focus should prioritize productivity-enhancing reforms and macroeconomic management rather than solely labor market deregulation or tax changes.