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Are minimum wages and payroll taxes a constraint to the creation of formal jobs in Morocco ?

Diego Angel-Urdinola, Abdoul Gadiry Barry and Jamal Guennouni

No 7808, Policy Research Working Paper Series from The World Bank

Abstract: This paper uses a search-and-matching model to examine the effects of labor regulations that influence the cost of formal labor (notably minimum wages and payroll taxes) on labor market outcomes in Morocco. The model assumes that the informal sector is unregulated and thus not directly affected by these labor policies. However, the model takes into consideration that although labor policies apply only to the formal sector, they may influence the size and the composition of employment in the informal sector, as well as the size and composition of unemployment and self-employment. The results indicate that these regulations, especially minimum wage policy, contribute to higher unemployment rates and constraint formalization in Morocco, especially for youth and women.

Date: 2016-08-31
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