Re-thinking employment quotas in the UAE

Emiratization is a government policy aimed at increasing the share of native workers in the UAE private sector. A distinguishing feature of Emiratization is the use of employment quotas for native workers so that the policy objective is met. We study the impact of the labor quota and find that its effect on native employment is ambiguous. While an increase in the employment quota for native workers increases the share of native workers, it also reduces the industry's production and employment of labor. The policy implications of the employment quota are significant, and ways to mitigate its negative impact include calibrating an optimal quota to maximize native employment, implementing the quota in industries facing less elastic demand for outputs and in industries where native and expatriate labor are closer substitutes.