Jackline Wahba

Document Type

Working Paper

Publication Date



Egypt has undergone a number of economic reform measures since the early 1990s, with the aim of liberalizing the economy and moving toward a market economy. As a result, among other measures, the Egyptian government has introduced a new labor law (No. 12) with the goal of increasing flexibility in the labor market. Law 12, which came into effect in July 2003, provides comprehensive guidelines for the recruitment, hiring, compensation, and termination of employees. In particular, it provides increased flexibility for firms in the hiring/firing process, which has been a major bottleneck for job creation in the Egyptian labor market. This working paper examines the effect of the new labor law on formal employment (jobs with contracts). The findings suggest that the new law has had a positive impact on those who were employed in 1998 in the private nonagricultural sector and in the private nonagricultural waged sector. However, the effect was not significant for new entrants to the labor market looking for first jobs.