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The report Jobs or Privileges: Unleashing the Employment Potential of the Middle East and North Africa shows that policies that lower competition and create an uneven playing field are common and constrain private sector job creation. These policies take different forms across countries and sectors but share several common features: They limit free entry in the domestic market, exclude certain firms from government programs, increase regulatory burden and uncertainty on the majority of firms, insulate certain firms and sectors from foreign competition, and create incentives that discourage dom

Labor market --- Manpower policy --- Employment policy --- Human resource development --- Labor market policy --- Manpower utilization --- Labor policy --- Labor supply --- Trade adjustment assistance --- Employees --- Market, Labor --- Supply and demand for labor --- Markets --- Government policy --- Supply and demand

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This paper uses an original database of 469 politically connected firms under the Mubarak regime in Egypt to explore the economic effects of close state-business relations. Previous research has shown that political connections are lucrative. The paper addresses several questions raised by this research. Do connected firms receive favorable regulatory treatment? They do: connected firms are more likely to benefit from trade protection, energy subsidies, access to land, and regulatory enforcement. Does regulatory capture account for the high value of connected firms? In the sample, regulatory capture as revealed by energy subsidies and trade protection account for the higher profits of politically connected firms. Do politically connected firms hurt aggregate growth? The paper identifies the growth effects of the entry of politically connected firms by comparing detailed 4-digit sectors where they entered, between 1996 and 2006, and sectors that remained unconnected. The entry of connected firms into new, modern, and previously unconnected sectors slows aggregate employment growth and skews the distribution of employment toward less productive, smaller firms.

Finance and Financial Sector Development --- Macroeconomics and Economic Growth --- Private Sector Development