Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/31591
Authors: 
Kaboub, Fadhel
Year of Publication: 
2007
Series/Report no.: 
Working papers // The Levy Economics Institute 499
Abstract: 
This paper establishes the financial feasibility of an employer-of-last-resort (ELR) program in a small developing country like Tunisia. It argues that an ELR-led economic development policy is vastly superior to the traditional import substitution industrialization (ISI), export-led, and FDI-led development models, all of which Tunisia has adopted without much success in reducing unemployment. Despite outperforming its peers in terms of macroeconomic stability, Tunisia's official unemployment rate still hovers around 15 percent, with two-thirds of first-time job seekers having university degrees. The paper demonstrates that a well-targeted ELR program can be gradually introduced over a six-year period to remedy this problem by reclaiming sovereignty over the country's domestic monetary and fiscal policies under a floating exchange rate regime. The estimated ELR net wage bill would be around 2.7 percent of GDP; however, spending by ELR workers would offset program costs, and the net effect on GDP would be an increase of about 3.6 percent. The paper concludes by proposing a set of complementary policy reforms that must accompany an ELR program to ensure long-term growth sustainability along with full employment and price stability.
Subjects: 
Tunisia
ELR
Full Employment
Unemployment
Job Creation
Functional Finance
Flexible Exchange Rate
Development
Export-led Growth
FDI-led Growth
ISI
JEL: 
B5
O11
O23
O55
E24
E62
H63
Document Type: 
Working Paper

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