Quality of Institutions and Structural Transformation

Understanding why North African economies are not growing as dynamically as they possibly could to generate enough jobs is a key interrogation.

The present report argues that growth processes may be influenced by the allocation of resources between sectors and that efficient resource allocation within sectors is critical for growth and job creation.

However, North African economies often suffer from distortions with high potential impacts on productivity as countries tend to suffer from high productivity dispersion at the level of firms, reflecting a misallocation issue.

This report provides recommendations to tackle the negative effect of inefficient institutions on resource allocation in North Africa. These recommendations encompass governance issues, such as the building of checks and balances through national and local institutions, strengthening the effective State capacity to reduce arbitrary behavior from bureaucrats and increase transparency. They also englobe measures to reduce credit constraints and attract FDI.