Are Minimum Wages and Payroll Taxes a Constraint to the Creation of Formal Jobs in Morocco?

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Product and Factor Market Distortions: The Case of the Manufacturing Sector in Morocco

“…Regression (1) shows that "old firms" present 21 percent lower TFPR. High entry barriers and low competition would allow these businesses to continue to operate despite low profitability.…”

“…Productivity gains then can be quantified by equalizing marginal products across firms. 1 Examples of output distortions include regulations restricting market access and/or firm size, bribes that have to be paid by firms in order to operate, public output subsidies, trade policies in the form of import protection and export subsidies (taxes), and distortions generated from exchange rate policies and price controls. Factor distortions are credit constraints, financial policies, tax policies, and labor regulations that differ across firms (for instance because of political connections) and affect the relative prices of capital and labor.…”