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D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Despite being a fixture of everyday life in the Arab world, wasta, which may be thought of as special influence by members of the same group or tribe, has received little attention from social scientists. Our casual empiricism suggests that wasta is an important determinant of how economic activities are organized and resources are allocated in Middle Eastern societies, yet economists, even those who specialize in work related to the Middle East, have not addressed the issue of wasta. With this paper we provide a modest beginning to filling that void. Specifically, we use the history of wasta, Hayek's concept of extended order and Coase's work on the nature of the firm to draw inferences regarding the existence of wasta and its persistence in Arab societies.JEL Classification: D21, K20, N45
This is a policy paper that analyzes the economic impact of mandated employment quotas for citizen workers among firms in the United Arab Emirates (UAE). We demonstrate the nature of the efficiency losses associated with these quotas, and then explore a workable policy alternative that can achieve the same employment objectives with lower efficiency loss. Design/methodology/approach: We begin with an extensive discussion of UAE labor policy, together with some data and salient features of the UAE labor market. We use this discussion to motivate and analyze a theoretical model of the way in which labor quotas impact firm production, input employment and efficiency. We then extend this model to our proposed policy alternative. Findings: The UAE's labor quotas create inefficiencies on a number of fronts, including productive inefficiency, higher product prices, and the possibility of reducing the number of jobs available to citizen workers. Our proposed policy alternative has the potential to ameliorate these efficiency losses, while still creating jobs for citizens. Originality/value: Labor quotas for citizen workers are a unique brand of labor regulation that has largely escaped economic analysis. Understanding their implications is informative in the context of labor market regulation generally, and particularly for countries with large expatriate labor forces that struggle to provide job opportunities for citizens.
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