Productivity and Trade Openness: A Sectoral Analysis of Morocco’s Economy

Abstract

Abstract This study investigates the impact of trade openness and specialization on sectoral Total Factor Productivity (TFP) in Morocco from 1998 to 2018, shedding light on the intricate dynamics of the trade-productivity nexus. By adopting a sectoral-level approach, it addresses the limitations of macroeconomic analyses and provides a more granular understanding of trade’s effects, filling a critical research gap for Morocco. While theory suggests that trade openness could enhance long-term TFP, Morocco’s structural constraints result in mixed short-term effects, benefiting developed sectors while challenging others. The findings reveal a negative long-term impact on TFP, driven by structural inertia, weak sectoral linkages, reliance on high-tech imports rather than domestic innovation, and limited technological spillovers. However, in the short term, specialization, as measured by revealed comparative advantage, has a modest positive effect on TFP growth across most sectors, except for the food sector. The effects of inter- and intra-sectoral specialization are mixed: while it enhances TFP in sectors like Telecommunications, Agriculture, and Utilities, it negatively affects sectors such as Commerce, Logistics, and Other Manufacturing. Trade intensity boosts TFP in Other Services, Commerce, and Chemicals but hampers other sectors. While human capital enhances TFP in the short term, machinery and equipment investment drives sustained growth. These findings underscore the need for structural reforms in Morocco to strengthen human capital, optimize resource allocation, and channel investments into high-potential sectors. Moreover, targeted sectoral policies that enhance competitiveness and leverage intersectoral linkages are crucial for maximizing the gains from trade liberalization and fostering sustainable productivity growth in Morocco.