Labor Market Nationalization Policies and Exporting Firm Outcomes: Evidence from Saudi Arabia

Patricia Cortés, Semiray Kasoolu and Carolina Pan

No 29283, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: J21 J61 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-ara, nep-ene, nep-int, nep-isf and nep-lab
Note: LS
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Published as Patricia Cortés & Semiray Kasoolu & Carolina Pan, 2023. "Labor Market Nationalization Policies and Exporting Firm Outcomes: Evidence from Saudi Arabia," Economic Development and Cultural Change, vol 71(4), pages 1397-1426.

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