1. Microeconomics of Growth: Case of Morocco
Najib Harabi, Professor of Economics, Solothurn University of Applied Sciences/Northwestern Switzerland

2. Contents Introduction Theoretical Background Empirical Framework
Conclusions and Policies Implications

3. Introduction Overall growth performance Macroeconomic Sources
Microeconomic sources
Focus of the Paper

4. Theoretical Framework
Theory of optimal Firm Size:
Technical economies of scale
Pecuniary economies of scale
External economies of scale and
Dynamic economies of scale

5. Empirical Investigation of Moroccan Firms
Data
Econometric analysis
- Econometric Specification
- Econometric Issues
Results

6. Data World Bank Survey: 1998 Sample: 370 Firms
Firms covering all firm sizes
All major economic sectors: manufacturing, construction, services and commerce

7. Econometric Specification
S (t) = S* + S (t-1) + (t).
S* (t) = c + X (t) + (t).
S (t) = c + X (t) + S (t-1) + (t),
where  (t)   (t) + (t).

8. Determinants of firm Growth
Size; age; legal form; location; innovative activity; diversification; the internal organization of the firm; market size; market structure; industry specific environment; state regulations and policies

9. Resutls 1) Firm specific variables 2) Firm Behavior
3) Market structure
4) Market demand
5) State regulations and policies
6) Inter-industry differences

10. Results
1) Firm specific variables:
Firm size seems to have a negative impact on firm growth. Small firms grow faster than larger ones.  
Firm age has also a negative impact on firm growth. Younger firms grow faster. 

11. Results
Firm location. In comparison with firms located in large urban centers, firms in medium urban centers and other smaller centers expect less growth. In this respect geography matters.

12. Results
In addition to geographic location the legal form also affects the growth process of firms. Being a limited liability company, for instance, is positively correlated with growth prospects.

13. Results 2) Firm Behavior
 Innovation behavior. The ability of the firm to innovate proves to be positively correlated with growth of sales.
Product diversification. A further positive source of firm’s growth is its ability to diversify its existing products and services. On the other hand firms that try diversify their product mix are less successful with respect to growth.

14. Results
Access to major inputs. The lack of access to qualified workers, to qualified managers and to good infrastructure (power, water, communication etc.) seems to be detrimental for the growth process of Moroccan firms. Less severe is the ability of firms to get access to financial resources and to industrial land.

15. Results 3) Market structure
 Price competition. The ability of firms to both adapt their price policy to competitive pressures and to increase or decrease their market share accordingly proves to be positively associated with sales growth.

16. Results 4) Market demand.
seems to exert an important impact on firm growth. (The variable MDEMAND shows a positive and statistically significant coefficient.)

17. Results 5) State regulations and policies
State regulations of foreign trade together with domestic price volatility seem to have affected firm growth negatively.

18. Results 6) Inter-industry differences
Theoretical and empirical studies suggest substantial inter-industry differences regarding firm growth. In the Moroccan context firms operating in the services and construction industries have experienced a less favorable growth environment than those in the manufacturing sector.

19. Policy Implications