Labor Market in MENA

Most Arab countries in MENA have been growing slowly for a long time and see themselves increasingly poor relative to the rest of the world, to both advanced countries and peer countries like Israel and Cyprus within MENA. There are a whole set of reasons for this lackluster performance which have been explored in earlier chapters. Human capital occupies a central role in modern thinking about growth. The labor market is the place where human capital is created and deployed. If we are to understand growth and development within MENA, we need to understand the creation and deployment of human capital. The endogenous growth model which was discussed in Chapter 4 is the appropriate venue for a discussion of the labor market. This chapter accepts the argument that the study of the links between labor markets and growth should concentrate on a study of labor market influences on the quantity, quality and productivity of human capital. This requires an investigation of the institutions that influence the acquisition and employment of human capital and their effectiveness in enhancing growth (Aghion and Howitt, 1998; Agénor, Nabli, Yousef and Jensen, 2004; Benhabib and Spiegel, 1994; and Pecorino, 1992)…