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

Alberto Behar ()

No 2015/191, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; labor market; Employment Elasticities; Labor Market Adjustment Costs; GCC; Gulf Cooperation Council; Inclusive Growth; GCC country; employment growth; GCC employment; GCC labor market structure; employment response; growth forecast; employment elasticity; GCC elasticity; employment projection; employment-growth relationship; employment rigidity; GCC aggregate; Employment; Labor markets; Public employment; Labor force; Public sector; Middle East; Middle East and Central Asia; North Africa; East Africa; Global (search for similar items in EconPapers)
Pages: 34
Date: 2015-08-18
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Citations: View citations in EconPapers (6)

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