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Can Hiring Quotas Work? The Effect of the Nitaqat Program on the Saudi Private Sector

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  • Jennifer R. Peck

Abstract

This paper studies the effects of quota-based labor regulations on firms in the context of Saudi Arabia's Nitaqat program, which imposed quotas for Saudi hiring at private firms. I use a comprehensive firm-level administrative dataset and exploit kinks in hiring incentives generated by the quotas to estimate the effects of this policy. I find that the program increased native employment at substantial cost to firms, as demonstrated by increasing exit rates and decreasing total employment at surviving firms. Firms without any Saudi employees at the onset of the program appear to bear most of these costs.

Suggested Citation

  • Jennifer R. Peck, 2017. "Can Hiring Quotas Work? The Effect of the Nitaqat Program on the Saudi Private Sector," American Economic Journal: Economic Policy, American Economic Association, vol. 9(2), pages 316-347, May.
    • Handle: RePEc:aea:aejpol:v:9:y:2017:i:2:p:316-47
    Note: DOI: 10.1257/pol.20150271
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    Citations

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    Cited by:

    1. Abu Elnasr E. Sobaih & Ahmed E. Abu Elnasr, 2023. "Local versus Foreign Worker Perceptions, Commitment and Attitudes toward Careers in Restaurants and Cafés: Evidence from Saudi Arabia," Sustainability, MDPI, vol. 15(6), pages 1-19, March.
    2. James P. Choy, 2024. "A theory of discriminatory institutions, with applications to apartheid and to the political economy of migration," Discussion Papers 2024-06, Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP).
    3. Kamiar Mohaddes & Jeffrey B. Nugent & Hoda Selim, 2018. "Reforming fiscal institutions in resource-rich Arab economies: Policy proposals," CAMA Working Papers 2018-41, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Patricia Cortes & Semiray Kasoolu & Carolina Ines Pan, 2020. "Labor Market Nationalization Policies and Firm Outcomes: Evidence from Saudi Arabia," CID Working Papers 381, Center for International Development at Harvard University.
    5. Conrad Miller & Jennifer Peck & Mehmet Seflek, 2019. "Integration Costs and Missing Women in Firms," NBER Working Papers 26271, National Bureau of Economic Research, Inc.
    6. Abdulelah Alrasheedy, 2019. "The Cost of Unemployment in Saudi Arabia," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(11), pages 1-30, November.
    7. Michael Lopesciolo & Daniela Muhaj & Carolina Ines Pan, 2021. "The Quest for Increased Saudization: Labor Market Outcomes and the Shadow Price of Workforce Nationalization Policies," Growth Lab Working Papers 179, Harvard's Growth Lab.
    8. Durand-Lasserve, Olivier, 2022. "Nationalization of the private sector labor force, quotas, matching and public jobs, an illustration with Saudi Arabia," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 98-117.
    9. Abu Elnasr E. Sobaih, 2023. "Challenges in Effective Implementation of Saudization Policy in the Restaurant Sector," Sustainability, MDPI, vol. 15(9), pages 1-17, May.
    10. Prakash, Nishith, 2020. "The Impact of Employment Quotas on the Economic Lives of Disadvantaged Minorities in India," IZA Discussion Papers 13847, Institute of Labor Economics (IZA).
    11. Eger, Claudia & Fetzer, Thiemo & Peck, Jennifer & Alodayni, Saleh, 2022. "Organizational, economic or cultural? Firm-side barriers to employing women in Saudi Arabia," World Development, Elsevier, vol. 160(C).
    12. Conrad Miller & Jennifer Peck & Mehmet Seflek, 2022. "Missing Women, Integration Costs, and Big Push Policies in the Saudi Labor Market," American Economic Journal: Applied Economics, American Economic Association, vol. 14(2), pages 51-77, April.
    13. Stephan Klasen & Anna Minasyan, 2021. "Affirmative Action and Intersectionality at the Top: Evidence from South Africa," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 60(1), pages 3-35, January.
    14. Ganong, Peter & Jäger, Simon, 2014. "A Permutation Test and Estimation Alternatives for the Regression Kink Design," IZA Discussion Papers 8282, Institute of Labor Economics (IZA).
    15. Hertog, Steffen, 2019. "In the spotlight: demands on Saudi Aramco are increasing," LSE Research Online Documents on Economics 101249, London School of Economics and Political Science, LSE Library.
    16. Michael Lopesciolo & Daniela Muhaj & Carolina Ines Pan, 2021. "The Quest for Increased Saudization: Labor Market Outcomes and the Shadow Price of Workforce Nationalization Policies," CID Working Papers 132a, Center for International Development at Harvard University.
    17. MATSUMOTO Kodai & OKUMURA Yota & NAKAMURA Kenta & MORIMOTO Atsushi & YUGAMI Kazufumi, 2024. "Revisiting Disability Employment and Firm Productivity in Japan," Discussion papers 24045, Research Institute of Economy, Trade and Industry (RIETI).
    18. Najam, Rafiuddin, 2024. "Closing the gap: Effect of a gender quota on women’s access to education in Afghanistan," Economics of Education Review, Elsevier, vol. 99(C).
    19. Abdulrahman Basahal & Abdullah Ahmed Jelli & Abdullah S. Alsabban & Sarah Basahel & Saleh Bajaba, 2023. "Factors Influencing Employee Productivity – A Saudi Manager’s Perspective," International Journal of Business and Management, Canadian Center of Science and Education, vol. 17(1), pages 1-39, February.
    20. Michael Levere & Purvi Sevak & David Stapleton, "undated". "Policy Changes for SourceAmerica Nonprofit Agencies: Impacts of Eliminating Section 14(c) and Reducing AbilityOne's Required Direct Labor Ratio," Mathematica Policy Research Reports dcbb25f4acc94421a7dd1cd45, Mathematica Policy Research.
    21. Moeeni, Safoura & Tanaka, Atsuko, 2023. "The effects of labor market opportunities on education: The case of a female hiring ceiling in Iran," Journal of Public Economics, Elsevier, vol. 224(C).
    22. Prakash, Nishith, 2020. "The impact of employment quotas on the economic lives of disadvantaged minorities in India," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 494-509.
    23. Gustavo de Souza, 2020. "Employment and Welfare Effects of the Quota for Disabled Workers in Brazil," Working Paper Series WP 2023-11, Federal Reserve Bank of Chicago.
    24. Ursina Schaede & Ville Mankki, 2022. "Quota vs Quality? Long-Term Gains from an Unusual Gender Quota," CESifo Working Paper Series 9811, CESifo.

    More about this item

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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    1. Can Hiring Quotas Work? The Effect of the Nitaqat Program on the Saudi Private Sector (American Economic Journal: Economic Policy 2017) in ReplicationWiki

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