Trade and foreign investment liberalization in Morocco: Country-wide and regional effects (Tunisia, India, Turkey)

This dissertation provides a detailed empirical assessment of Morocco's regional and county-wide effects of its recent trade and Foreign Direct Investment (FDI) liberalization reforms. It also explores alternative explanations for Morocco's manufacturing sector productivity and competitiveness slowdown. Overall, the results of this analysis indicate that regions and sectors in Morocco have responded well to the underlying shifts in the economy as a result of globalization. This thesis consists of five main essays.; In the first essay, the effects of Morocco's recent trade reforms are analyzed. First, detailed trade agreements such as the World Trade Organization (WTO), the European Union (E.U.)-Morocco and the proposed United States (U.S.)-Morocco free trade agreements (FTAs) are presented. The analysis of the effects of these FTAs shows that the costs to Morocco in the short-run will exceed the benefits from either FTA.; The second essay is devoted to the analysis of Morocco's competitiveness in the E.U. market. To do that, a comparative advantage measure for Morocco and its main competitors in the European market is implemented following Balassa (1965). Morocco is shown to have increased its market share in the European market but continues to loose comparative advantage to Tunisia, India, and Turkey.; In the third essay, Morocco's regional specialization and industry concentration are measured following Krugman (1991b). The results show that urbanized areas are more diversified while the remote Southern regions are specialized in labor-intensive, low-paying manufacturing sectors. Concentration in the electric and electronics sector is predominant in the Grand Casablanca region. In addition, foreign investment is found to be more concentrated than manufacturing activity in general.; In the fourth essay, agglomeration effects are analyzed based on detailed plant-level data and by implementing a Poisson regression model for Morocco's provinces and localities. Estimation results indicate that sector-specific agglomeration effects are statistically significant in most sectors. Foreign firms are found to rely on past foreign investment location to minimize uncertainty and costs. The results suggest that urbanization economies present in Casablanca and Tangiers represent an important factor in the location decision.; The fifth essay tests the FDI-export relationship at the Moroccan province level and investigates the decision to participate in international markets. The results indicate that inward FDI potentially stimulates exports, controlling for productivity, firm size and age. Factors that influence the probability to export are different from those affecting export propensity in Moroccan firms.