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.
Mr. Selim A Elekdag, Mr. Saade Chami, and Mr. Ivan Tchakarov
This paper uses a variant of the IMF's Global Economy Model (GEM) to estimate the macroeconomic effects of Yemen's full accession into the Gulf Cooperation Council (GCC). After calibrating the model to Yemen and the GCC countries, several simulations were carried out to estimate the potential impact of economic integration on both. The paper draws two fundamental conclusions. First, further steps in regional integration would enhance competition and produce large economic benefits for both Yemen and the GCC countries. In particular, we show that in some cases economic integration could increase GDP in Yemen by as much as 18 percent and in the GCC by as much as 20 percent over the long run. Second, even if market structures do not improve substantially, GCC enlargement can still generate substantial spillover gains with consumption increasing by up to 7 percent in Yemen and 8 percent in the GCC, respectively.
Figure 6: Private-sector Employment Projections, Thousands
Similarly, for the GCC aggregate, employment growth of an expected 4¾ percent per year exceeds the output growth forecast because of the lagged effects of past high output growth rates. Under the baseline, private-sector employment rises by 650 000 from 2.05 million in 2014 to 2.7 million in 2020 for GCC nationals.
The red and yellow lines represent GDP growth rates that are 2 percent faster and slower, respectively, than baseline from 2016 onwards. For example, GCCemployment
International Monetary Fund. Middle East and Central Asia Dept.
nationals 1 has not resulted from insufficient job creation, but from skills mismatches, high reservation wages, and the attractiveness of public-sector employment. Based on historic trends, and in light of the rapidly growing workforce, the number of unemployed GCC nationals could increase by as many as 2 to 3 million over the next 5 years, compared with approximately 5 million employed nationals in 2010.
Sources: National authorities; and IMF staff calculations.
On the basis of staff calculations, GCC countries could be expected
Mr. Raphael A Espinoza, Ms. Ghada Fayad, and Mr. Ananthakrishnan Prasad
was matched by a strong increase in total employment, from around 7 million workers in the GCC in 1990 to 16 million workers in 2009.
Table 2.2 .
Employment and population in the GCC, in millions