Misallocation of resources, structural transformation and productivity growth in North Africa

Abstract

North African economies are characterized by slow economic diversification and persistent unemployment, especially among educated youth. Labour productivity has registered only a moderate increase compared with more dynamic emerging countries like India or Turkey. These patterns share a common origin, which lies in the existence of many distortions in the economy that prevent an efficient allocation of resources between firms and sectors. These distortions are caused by market and institutional failures. Inefficient institutions can be at the origin of potentially severe distortions. Reforms designed to tackle these distortions could generate substantial productivity gains and promote structural transformation in North Africa.