PublicDisclosureAuthorized PublicDisclosureAuthorized PolicyResearchWorkingPaper10455 AnEmpiricalAnalysisoftheSocialContractintheMiddleEastandNorthAfrica RegionandtheRoleofDigitalizationinItsTransformation FaridGasmiDorgylesC.M.Kouakou PaulNoumbaUmPedroRojasMilla MiddleEastandNorthAfricaRegionInfrastructureDepartment May2023 PolicyResearchWorkingPaper10455 Abstract ThispaperpresentsanempiricalapplicationandanalysisofthesocialcontractincountriesintheMiddleEastandNorthAfrica.Thepapersuggestsasimpleoperationalmodelthatsynthesizesasocialcontract’sthreemaincharacteristics:participation,protection,andprovision,betweenagov-ernmentanditscitizens.Thisempirical“3-P”frameworkallowsinvestigatingtherolethatgovernmentprovisionandprotectionmayhaveoncitizenparticipation,whichisparticularlypertinentgiventhepoliticalandeconomicdevelopmentofcountriesintheMiddleEastandNorthAfrica.ThepapercomparestheevaluationofthehealthofthesocialcontractincountriesintheMiddleEastandNorthAfricaregiontothatofcountriesintheOrganisa-tionforEconomicCo-operationandDevelopment.Theempiricalevidenceshowsthatthesocialbenefitsprovidedtocitizensthroughimproveddeliveryofbasicserviceshave comeatthecostofimpairedpoliticalparticipation.ThisfeatureofthesocialcontractintheMiddleEastandNorthAfricamaybeconsideredoneoftherootcausesofthesocialturmoilsomecountrieshavebeenstrugglingwithinrecentdecades.Digitaltransformationisapotentiallypowerfulchannelthroughwhichtherelationshipbetweengovern-mentandcitizenscanimprove,andthepaperfindsthatithasathree-yearlaggedpositiveeffectonthequalityofthesocialcontractintheMiddleEastandNorthAfricaandtheeffectisinverselyU-shaped.ThissuggeststhatstructuralandinstitutionalimprovementsareneededincountriesintheMiddleEastandNorthAfricaforthequalityoftheirsocialcontracttoreachlevelscomparabletothoseofcountriesintheOrganisationforEconomicCo-operationandDevelopment. ThispaperisaproductoftheInfrastructureDepartment,MiddleEastandNorthAfricaRegion.ItispartofalargereffortbytheWorldBanktoprovideopenaccesstoitsresearchandmakeacontributiontodevelopmentpolicydiscussionsaroundtheworld.PolicyResearchWorkingPapersarealsopostedontheWebathttp://www.worldbank.org/prwp.Theauthorsmaybecontactedatpnoumbaum@worldbank.org,farid.gasmi@tse-fr.eu. ThePolicyResearchWorkingPaperSeriesdisseminatesthefindingsofworkinprogresstoencouragetheexchangeofideasaboutdevelopmentissues.Anobjectiveoftheseriesistogetthefindingsoutquickly,evenifthepresentationsarelessthanfullypolished.Thepaperscarrythenamesoftheauthorsandshouldbecitedaccordingly.Thefindings,interpretations,andconclusionsexpressedinthispaperareentirelythoseoftheauthors.TheydonotnecessarilyrepresenttheviewsoftheInternationalBankforReconstructionandDevelopment/WorldBankanditsaffiliatedorganizations,orthoseoftheExecutiveDirectorsoftheWorldBankorthegovernmentstheyrepresent. ProducedbytheResearchSupportTeam AnEmpiricalAnalysisoftheSocialContractintheMiddleEastandNorthAfrica RegionandtheRoleofDigitalizationinItsTransformation FaridGASMIa,DorgylesC.M.KOUAKOUb,PaulNOUMBAUMc,andPedroROJASMILLAa Keywords:Development,socialcontract,digitaltransformation,MENA,OECD. JELclassificationcodes:L96,L97,O10. TheauthorswouldliketothankJoséAurazoandSamathanMetevierforinsightfulsuggestions,andRadiaBachaforhelpwithlocatingsomeofthedatausedinthispaper.FaridGasmiacknowledgesfundingfromtheFrenchNationalResearchAgency(ANR)undertheInvestmentsfortheFuture(Investissementsd'Avenir)program,grantANR-17-EURE-0010.Theviewsexpressedareonlyoursanddonotnecessarilyreflectthoseoftheinstitutionsweareaffiliatedwith. aToulouseSchoolofEconomics,UniversitéToulouseCapitole,farid.gasmi@tse-fr.euandpedro.rojas-milla@ut-capitole.fr. bGrenobleAppliedEconomicsLaboratory,UniversitéGrenobleAlpesandTheWorldBank,dkouakou@worldbank.org. cTheWorldBank,pnoumbaum@worldbank.org. 1.Introduction Inrecentyears,manycountriesintheMiddleEastandNorthAfrica(MENA)haveexperiencedpopularuprisingsthaterodedthetrustthatcitizensputintheirgovernments.1Forsomeobservers,theseeventstaketheirdeeprootsinthewaytherelationshipsbetweenstateandsocietyhavebeenshapedafterthesecountries'independenceinthe1950sand1960s,i.e.,thenatureoftheirsocialcontract,SChereafter.Essentially,governmentsthathavecomeintopowerinthesecountriesprioritizedprovidingsocialbenefits,oftenatthecostoflimitingcitizens'participationincrucialpoliticalandeconomicdecisions.Agrowingpopulationandanincreasinglychallengingeconomiccontexthaveweakenedthisgovernancesystemandgeneratedseverediscontentwiththegovernmentsandtheirinstitutions. CountriesintheMENAregionfacemultiplechallengesduetoanincreasinglyunsustainableSC.Thisunsustainabilityresultsfromtherentierismnatureofsomecountries,thepoliticalinstabilityofothers,andtheintensifiedvulnerabilitiesofthisregiontohealthpandemicsand/orclimatechange.Verticalcontrolsandprivilegednetworkingbetweenbusinessesandthepoliticaleliteshavelimitedeconomicopportunitiesforcitizensandincreasedsocio-economicinequalities.Asaresult,corruption,lackoftransparency,elitecapture,andpoliticalcoercionarepredominant