On the interaction between exports and labor market regulation: Evidence from the MENA countries

Using a panel of MENA countries, this paper aims to examine the interaction between exports performance and labor market regulations on employment levels. The theoretical predictions on this literature show that the effects of exports in any given country can be altered by the nature of labor market regulations. Previous studies showed that trade liberalization was more likely to have a positive impact on employment rates in countries with flexible labor markets and vice versa, mainly because of how the labor market adjustment process to trade openness occurs. Our main findings how that labor market rigidity reduces the positive impact of exports on employment. Indeed, rigid labor markets may limit the easiness of creating new jobs that satisfy the increased labor demand in expanding sectors when a country experience an increase in its exports. (C) 2018 Board of Trustees of the University of Illinois. Published by Elsevier Inc. All rights reserved.