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Towards a New Economic Model for Tunisia - Identifying Tunisia's Binding Constraints to Broad-Based Growth

27-Mar-2013

In January of 2011, the people of Tunisia took to the streets to protest the existing 23-year-old regime, thus igniting the Tunisian Revolution and inspiring a wave of popular upheaval in the Arab world. To some observers the sudden outpouring of discontent was a surprise. Tunisia had achieved a notably solid record of economic growth, which averaged nearly 5 percent per year over the previous decade. Growth had in turn helped reduce the rate of poverty to below 5 percent nationally by 2005 (source: official INS statistics).1 Yet this apparent success obscured inherent weaknesses in the country’s development model. Unemployment remained stubbornly high and youth unemployment kept rising. Regional disparities in economic growth, income and wealth created what many today consider to be “two Tunisias”—one relatively affluent, along the coastal regions, and another in the lagging interior regions. Standards of living for many Tunisians stagnated, while few opportunities existed either to invest or work in private enterprises. Meanwhile, neither the public nor the private sector was expanding employment fast enough to absorb the growing supply of university graduates, leading to rapidly rising rates of unemployment among Tunisia’s most educated young people. Increasing economic dissatisfaction was reinforced by a lack of political freedom and by increasing high-level corruption, which had a corrosive effect on the business climate. In the end, the revolution was sparked by a conflict between a small, informal fruit vendor and the police in a region particularly lacking in business and employment opportunities. The fruit vendor’s position of economic disenfranchisement and loss of dignity prompted his tragic selfimmolation, with well-known and far reaching consequences. Yet the seemingly mundane precipitating events were also emblematic of both the importance of small informal activities to earn a living, and of the lack of freedom to engage in and retain the fruits of one’s endeavors in pre-revolutionary Tunisia.

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