Comparing the employment-output elasticities of migrants and nationals: the case of the Gulf Cooperation Council

ABSTRACT

Many countries have large or increasing migrant populations. We estimate the elasticity of private-sector employment to nonoil GDP for nationals and migrants using a Seemingly Unrelated Error Correction (SUREC) model. We use data from the Gulf Cooperation Council (GCC) countries, which have a particularly large share of foreign workers. Our results indicate that the employment response is statistically significantly lower for nationals, who have an estimated short-run elasticity of only 0.15 and a long-run response of 0.7, than for migrants, where the short- and long-run elasticities are 0.35 and almost unity. Lower elasticities could signal higher labour market adjustment costs. In the context of low oil prices, forecasts imply a significant jobs shortfall for nationals in the coming years.

KEYWORDS:

• Employment elasticities
• labour market adjustment costs
• GCC
• Gulf Cooperation Council
• migrants

JEL CLASSIFICATION:

• J08
• J01
• J05
• J21
• J23

Disclosure statement

The views expressed here are those of the author and should not be attributed to the IMF,its executive board, or its management.

Notes

¹ The GCC comprises Bahrain, Oman, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

² Other papers include Kapsos (2005); Crivelli, Furceri, and Toujas-Bernate (2012); and Ball, Jalles, and Loungani (2015).

³ Detailed country-level results are available on request. Augmented Dicky–Fuller (ADF) and Taylor and Sarno (1998) panel unit root tests are also consistent with a unit root.

⁴ Long-run elasticities below unity could signal labour productivity growth or be an observed long-run implication of low short-run coefficients (Sims, 1974; cited in Nickel 1986).