Why Is Tunisia’s Unemployment So High? Evidence From Policy Factors

Aymen Belgacem and Jérôme Vacher

No 2023/219, IMF Working Papers from International Monetary Fund

Abstract: Tunisia has one of the highest unemployment rates within the Middle East and Central Asia. We look at the extent to which institutional factors explain those high unemployment levels. We also assess unemployment cyclicality, by looking at the determinants of labor market sensitivity to the output gap. We find that during the last decade the deterioration of institutional factors that affect labor demand explain not only about a quarter of the unemployment rate increase in Tunisia, but also Tunisia’s excess sensitivity of unemployment to the output gap. Our results suggest that an improved business environment and product market competition, increased labor market flexibility as well as reduced financial constraints and informality would help reduce Tunisia’s unemployment.

Keywords: Unemployment; Labor Market; Tunisia; unemployment cyclicality; labor market sensitivity; Tunisia's unemployment; sensitivity to the output gap; Okun's coefficient; product market regulation; Labor markets; Labor market regulations; Unemployment rate; Employment protection; Middle East and Central Asia; Global; North Africa (search for similar items in EconPapers)
Pages: 39
Date: 2023-10-27
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