The Effect of Economic Growth on Employment in GCC Countries

Abstract

The objective of this research is to analyze the employment intensity of growth in six Gulf Cooperation Council countries between 1970 and 2017. To this end, a two-step econometric methodology is proposed. First, we estimate the time-varying employment intensity of growth using the time-varying parameters model based on the Kalman filter. Second, we identify the short and long-run determinants of the obtained employment intensity of growth using the Pooled Mean Group estimator. The analysis uncovers that elasticities range between 0.4 and 0.6 and has an increasing pattern over time. Findings reveal that in the long-run, the employment intensity is positively affected by trade liberalization, the share of services in GDP, the working-age population growth, and urbanization, while macroeconomic volatility has a negative impact. In the short-run, trade liberalization and natural resource rents exert adverse but weak effects on employment intensity. Based on these findings, some policy recommendations are drawn.