GLOBAL PRODUCTIVITY
CHAPTER 5
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FIGURE 5.22 Factors supporting productivity growth in MNA Productivity levels relative to advanced economies are the highest in MNA’s capital-intensive mining sector. Evidence for the Arab Republic of Egypt and for Morocco suggests that productivity growth in North Africa has been largely limited to within-sector productivity gains. A. Sectoral productivity levels, 2017 Percent of advanced economy median 160 120
B. Within- and between-sector contributions to productivity growth
MNA
EMDEs
Percentage points 5 4
Construction
Other service
Agriculture
Transport
Utilities
Manufacturing
1
Trade
2
0
Finance
3
40
Mining
80
Within sectors Between sectors
0 -1 1990s 2003-08 2013-17 1990s 2003-08 2013-17 Egypt, Arab Rep.
Morocco
Sources: Groningen Growth Development Center Database; Haver Analytics; International Labour Organization; Penn World Table; World Bank. Note: Productivity is defined as real GDP per worker (at 2010 market prices and exchange rates). Country group aggregates for a given year are calculated using constant 2010 U.S. dollar GDP weights. Data for multiyear spans show simple averages of the annual data. EMDEs = emerging market and developing economies; MNA = Middle East and North Africa. A. Medians across economies in each sector. Horizontal line indicates 50 percent. Sample includes 12 MNA economies. B. The within-sector productivity contribution shows the initial real value added-weighted productivity growth contribution, holding employment share fixed; the between-sector contribution measures the productivity growth from a cross-sectoral shift of employment.
Other drivers of labor productivity growth. Weak productivity in the MNA region has been associated with underdevelopment of the private sector, overreliance on the public sector, and lack of economic diversification (Devarajan and Mottaghi 2015). •
Large public sector. On average, about one-fifth of the region’s workforce is employed in the public sector, and public-private sector wage gaps are among the highest in the world (Purfield et al. 2018; Tamirisa and Duenwald 2018). The education system is targeted toward government employment, with few high-quality private sector jobs (World Bank 2018k). These dynamics hold back the adoption of technology from abroad (Mitra et al. 2016; Raggl 2015; Samargandi 2018). In the GCC, weak productivity growth has been associated with low mobility of highskilled foreign workers (Callen et al. 2014).
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Restrictive business climate. Poor governance quality, large informal sectors, and cumbersome tax policy and administration hampered the reallocation of resources from low-productivity to higher-productivity firms (Nabli 2007; World Bank 2016d). Non-GCC economies in MNA rank especially low in the World Bank’s Worldwide Governance Indicators, such as regulatory quality and government effectiveness. Private firms often face challenges in access to finance, yet providing access to formal finance is associated with labor productivity growth being 2 percentage points higher in MNA firms (Blancher, Bibolov, and Fouejieu 2019).
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Anemic private sector. Firm productivity in MNA has been restricted by low firm turnover and creation. Only six limited liability companies were created annually for
