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Trade Liberalization and Employment in the Moroccan Manufacturing Sector

Listed author(s):
  • Lahcen ACHY

    (INSEA, Rabat, Morocco)

  • Khalid SEKKAT

    (ULB, Brussels, Belgium)

This paper uses firm level data to investigate the impact of trade liberalization on manufacturing sector employment in Morocco. This paper extends the existing research in various dimensions. First, it analyses the effect of trade openness on different skill levels of the manufacturing labor force. Second, the paper investigates the role of technology in explaining the magnitude of employment response following trade liberalization reforms. Our empirical results indicate that technology, as measured by capital intensity, and the share of new capital matters relatively more than trade in accounting for employment changes. In terms of policy implications, trade protection does not appear to be an effective tool in terms of saving jobs. Moreover, Moroccan commitments to further liberalize its trade means that manufacturing firms will have to face more competitive pressures on both domestic and foreign markets. Those firms that are endowed with upgraded technology are more likely to maintain or potentially raise their market shares, and hence create more jobs. Our results indicate that openness to foreign trade induces a significant skill composition effect. However, it also appears that skilled labor demand is highly sensitive to relative wages, which is consistent with the dominance of low value added products in the Moroccan manufacturing industries for which labor cost largely matters. The challenge for policy-makers is to design an appropriate support policies that stimulate domestic firms to invest and upgrade their technologies, ensure some degree of labor market flexibility, and create a business environment attractive for foreign investment.

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File URL: http://econwpa.repec.org/eps/it/papers/0512/0512011.pdf
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Paper provided by EconWPA in its series International Trade with number 0512011.

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Length: 31 pages
Date of creation: 14 Dec 2005
Handle: RePEc:wpa:wuwpit:0512011
Note: Type of Document - pdf; pages: 31. Trade liberalization and employment
Contact details of provider: Web page: http://econwpa.repec.org

References listed on IDEAS
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  1. Sekkat Khalid, 2007. "Sources of Growth in Morocco: An Emperical Analysis in a Regional Perspective," Review of Middle East Economics and Finance, De Gruyter, vol. 2(1), pages 1-17, June.
  2. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, "undated". "What Determines Firm Size?," CRSP working papers 496, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  3. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 20-43, July.
  4. Milner, Chris & Wright, Peter, 1998. "Modelling Labour Market Adjustment to Trade Liberalisation in an Industrialising Economy," Economic Journal, Royal Economic Society, vol. 108(447), pages 509-528, March.
  5. Sanjaya Lall, "undated". "The Employment Impact Of Globalisation In Developing Countries," QEH Working Papers qehwps93, Queen Elizabeth House, University of Oxford.
  6. Agenor, Pierre-Richard & Aynaoui, Karim El, 2003. "Labor market policies and unemployment in Morocco : a quantitative analysis," Policy Research Working Paper Series 3091, The World Bank.
  7. Harrison, Ann & Hanson, Gordon, 1999. "Who gains from trade reform? Some remaining puzzles," Journal of Development Economics, Elsevier, vol. 59(1), pages 125-154, June.
  8. Thomas F. Rutherford & E. Elisabet Rutstrom & David Tarr, 2014. "Morocco's free trade agreement with the EU: A quantitative assessment," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 17, pages 405-437 World Scientific Publishing Co. Pte. Ltd..
  9. Harabi, Najib, 2003. "Déterminants de la croissance des entreprises: Une analyse empirique du Maroc
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    ," MPRA Paper 4440, University Library of Munich, Germany.
  10. Greenaway, David & Hine, Robert C. & Wright, Peter, 1999. "An empirical assessment of the impact of trade on employment in the United Kingdom," European Journal of Political Economy, Elsevier, vol. 15(3), pages 485-500, September.
  11. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
  12. André Sapir & Mathias Dewatripont & Khalid Sekkat, 1999. "Trade and jobs in Europe: much ado about nothing?," ULB Institutional Repository 2013/8076, ULB -- Universite Libre de Bruxelles.
  13. Khalid Sekkat, 2004. "The sources of growth in Morocco: an empirical analysis in a regional perspective," ULB Institutional Repository 2013/7356, ULB -- Universite Libre de Bruxelles.
  14. Currie, Janet & Harrison, Ann E, 1997. "Sharing the Costs: The Impact of Trade Reform on Capital and Labor in Morocco," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 44-71, July.
  15. Dewatripont, Mathias & Sapir, Andre & Sekkat, Khalid (ed.), 1999. "Trade and Jobs in Europe: Much Ado About Nothing?," OUP Catalogue, Oxford University Press, number 9780198293606, April.
  16. Gauthier, Bernard & Gersovitz, Mark, 1997. "Revenue erosion through exemption and evasion in Cameroon, 1993," Journal of Public Economics, Elsevier, vol. 64(3), pages 407-424, June.
  17. Ana L. Revenga, 1992. "Exporting Jobs?The Impact of Import Competition on Employment and Wages in U. S. Manufacturing," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 255-284.
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