A LONG-TERM VIEW OF MENA’S ECONOMIES AND LABOR MARKETS
BOX 3.1
Productivity gains and contribution to growth from early reforms in Tunisia
In Tunisia, trade integration has been a key driver of technical progress and productivity growth since the mid-1990s (World Bank 2008). Through easier access to technology-intensive equipment and machinery, greater penetration of new markets, and enhanced competitive pressure, trade integration has led to higher growth in total factor productivity (TFP) and a higher contribution of the latter to growth (figure B3.1.1).a Annual growth in TFP ranged between 1.24 percent in the 1990s and 1.40 percent in 2000–06. As a result, TFP’s contri-
bution to growth in gross domestic product jumped to 43 percent in 2007. Tunisia’s TFP growth, however, remains below that of comparable (and successful) countries, such as the Republic of Korea (1.9 percent) and Malaysia (1.5 percent). A recent World Bank publication (see World Bank 2010) argues for a second generation of reforms and a change in the growth model of the country, aimed at facilitating the transition to a more technologyintensive economy to support productivity and thus competitiveness and growth.
FIGURE B3.1.1 Contribution of total factor productivity to growth in Tunisia, 1961–2008 Growth decomposition, 1961–2008
US$ (billions, constant 2000)
25 Contribution of total factor productivity: 45%
20 15
Contribution of capital and labor: 55%
10 5
Real GDP: average annual growth in 1961–2008: 5.04%
08 20
05 20
01 20
97 19
93 19
89 19
85 19
81 19
77 19
73 19
69 19
65 19
19
61
0
Real GDP if total factor productivity was zero
Source: World Bank 2010. Note: GDP = gross domestic product. a. In 1995, trade protection vis-à-vis the European Union (EU) was gradually unraveled as part of the Tunisia-EU Association Agreement, and by January 2008, the free trade area with the EU was completed for industrial goods. These reforms, supported by earlier investments in human and physical capital, have effectively led to a sharp increase in productivity (World Bank 2008).
By the early 1990s, the collapse of oil prices and the emergence of serious macroeconomic imbalances, together with continued rapid labor growth, propelled unemployment rates to their highest in decades (figure 3.6). This well-known unemployment challenge remains entrenched in the region today. Two main factors appear to be behind these disappointing employment outcomes.
First, employment was created in low-quality jobs,10 skewed toward the informal sector11 (particularly construction) or special employment programs to support job creation (mainly in resource-rich countries). Second, the number of jobs created, while comparable to other countries in the world, was not enough to absorb the increasing number of new entrants into the labor market.
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