The view that Morocco is at a crossroads in terms of its growth model and that a new model is needed was forcefully argued by Agénor and El Aynaoui (2015). In their view a fundamental feature of this new model should be to promote a gradual transition along the world technology frontier through increased productivity and innovation, in order for the country to better position itself in global value chains and be able to compete in the international markets for goods and services that are intensive in skilled labor and technological inputs. In a context of high and persistent unemployment, and continued entry of young job seekers on the labor market, such a strategy is essential to accelerate growth and create jobs. To do so requires implementing a number of policies ‐‐ with respect to public investment, policies to raise the quality of education, labor market reforms to reduce the cost of labor, specific policies towards strategic sectors, strengthening the role of the domestic financial sector in the financing of SMEs, and macroeconomic policy reforms (including with respect to the exchange rate regime).

This paper offers a broader proposal for a new growth model for Morocco. While it agrees with the fundamental feature of the new growth model advocated by Agénor and El Aynaoui (2015), it differs in some of the diagnostic of the weaknesses of the current growth model, while extending and complementing the proposed model in several directions. Issues with respect to which the diagnostic differs relate to the importance, alluded to earlier, of the global trend toward automation (which tends to reduce the demand for low‐skilled labor around the world), how investment in education can improve the quality of human capital and address the skills mismatch in the labor market, the role of the tourism industry, the role of the state in improving efficiency, and how to reverse the trend toward lower participation rates for women (as well as, to some extent, men) in the labor market.<sup>4</sup> In addition, the new model proposed in this paper fully reflects the lessons from the recent research on the causes of middle‐income traps and how to escape from them.

The remainder of the paper is organized as follows. Section 2 provides an overview of the growth model that Morocco has adopted in the past decades, its economic and social achievements, and its limitations going forward. Section 3 characterizes the proposed growth model, which involves, in particular, an improvement in the quality of education, promoting the transition from labor‐intensive imitation activities to technology‐intensive innovation activities, increased public investment in advanced infrastructure, improving productivity and increasing value added in key sectors (including agriculture, high‐end tourism and renewable energies), and measures designed to promote women’s participation in the labor force and reduce gender inequality. The effects of this model on growth, industrial transformation, and the labor market in Morocco are discussed in Section 4, using numerical experiments based on an analytical framework that explicitly distinguishes between imitation and transformation activities.

> 4 The importance of human capital accumulation is also emphasized in African Development Bank (2015) and Kingdom of Morocco, Systematic Country Diagnostic, Governing Towards Efficiency, Equity, Education, and Endurance. World Bank, 2018.

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