Download This PaperIs Outflow of Workers’ Remittances Affecting the Kingdom of Saudi Arabia’s Economy in the Long Run?
Journal of Economic & Management Perspectives, 2019, Volume 13, Issue 2, 5-13.
9 Pages Posted: 7 May 2020
Date Written: December 10, 2019
Abstract
The Kingdom of Saudi Arabia vision for 2030 is to replace foreign laborers with local ones to reduce Workers’ Remittances Outflows (WOR), which weaken economic growth in the short term but has no effect in the long term according to previous literature review. The authors investigated the impact of WOR on the economy by employing the Bai-Perron test and OLS regression. The results reveal that the structural breaks are in 1981 and 1987. Furthermore, the results find that the impact of WOR and Government Expenditure (GE) are negatively significant, while Inflation (INF) and Exports (EX) are positively significant on the economy. Moreover, the explanatory power of the model is 87.3%. The authors conclude that rather than replacing foreign laborers with local ones, the foreign laborers should be encouraged to invest locally. In addition, more procedures should be taken to encourage exports. Moreover, government expenditure result’s is consistent with neoclassic economists’ explanation. Finally, the outcome of exports and expenditure will increase inflation and cause its impact on economy. We recommend that further research be conducted, using quarterly or monthly data, to pave the way for applying ARDL methodology.
Keywords: Remittance; Worker; Outflow; Saudi Arabia
JEL Classification: C10; C40; E0; J60
Suggested Citation: Suggested Citation