Comparing the Employment-Output Elasticities of Expatriates and Nationals in the Gulf Cooperation Council

Author/Editor:

Alberto Behar

Publication Date:

August 18, 2015

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We estimate the elasticity of private-sector employment to non-oil GDP in the Gulf Cooperation Council (GCC) for GCC nationals and expatriates using a Seemingly Unrelated Error Correction (SUREC) model. Our results indicate that the employment response is lower for nationals, who have an estimated short-run elasticity of only 0.15 and a long-run response of 0.7 or less. The elasticity is almost unity for expatriates in the long run and 0.35 in the short run. We interpret low elasticities as indirect evidence of labor market adjustment costs, which could include hiring and firing rigidities, skills mismatches, and reluctance to accept private sector jobs. Forecasts suggest that, absent measures to reduce adjustment costs, the private sector will only be able to absorb a small portion of nationals entering the labor force.

Series:

Working Paper No. 15/191

Subject(s):

English

Publication Date:

August 18, 2015

ISBN/ISSN:

9781513573885/1018-5941

Stock No:

WPIEA2015191

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

34

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