Working Paper: NBER ID: w29283
Authors: Patricia Corts; Semiray Kasoolu; Carolina Pan
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.
Keywords: Labor Market Nationalization; Exporting Firms; Saudi Arabia; Nitaqat Policy
JEL Codes: J21; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Nitaqat policy (J68) | employment of Saudi nationals (J68) |
| Nitaqat policy (J68) | firm survival (L21) |
| Nitaqat policy (J68) | likelihood to export (F10) |
| Nitaqat policy (J68) | value of exports (F10) |
| Nitaqat policy (J68) | labor force reduction (J63) |
| Nitaqat policy (J68) | gender representation (J16) |
| Nitaqat policy (J68) | overall labor costs (J39) |
| Nitaqat policy (J68) | changes in firm behavior (D21) |