| Despite the importance of firm level training in the MENA region for alleviating the issues of high youth unemployment rates, skills mismatches in the labor market, and the long transition periods between the education and labor markets, the incidence of firm level training in the region is lower than the global average. Given the prevalence of state capture by politically connected firms in the Middle East and North Africa, it is important to examine the role of political connections in training. Since state capture enables politically connected firms to gain advantage over non-connected firms by gaining easier access to subsidies, finances, land, and infrastructure, these firms are able to allocate more resources to firm level training than non-connected firms. Using a Probit model to estimate the probability of provision of training in a firm given its political connections, this paper finds that politically connected firms in the Middle East and North Africa that capture the state have a higher probability of providing formal training to their employees than non connected firms. These results indicate that politically connected firms are able to allocate more resources to training, thereby increasing their productivity and crowding out competition from non-connected firms, resulting in economic stagnation. |
