Labor Market Nationalization Policies and Exporting Firm Outcomes: Evidence from Saudi Arabia

Abstract

In the past decade, Gulf countries have imposed hiring quotas to promote native participation in the private sector and address unemployment. We explore how one such policy, Nitaqat in Saudi Arabia, affected exporting firms. We find that while the policy increased Saudi employment by these firms, it came at a cost. In the year following implementation, relative to firms above the quota, firms below were 1.5 percentage points more likely to exit the market and 7 percentage points less likely to export, and conditional on exporting, their exports fell by 10%–20%. These short-term effects persisted for at least 3 years.