Patricia Cortes (Boston University)

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

Coauthors: Semiray Kasoolu et 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.  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 implementation of the policy, relative to firms above the quota, exporting firms below the quota reduced their labor force by 10 percent, were 8 percent less likely to export, and conditional on exporting, their exports fell by 27 percent. We also 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.

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