Expatriate jobs and productivity: Evidence from two GCC economies

Abstract

The oil-rich GCC economies are increasingly adopting job nationalization policies to create employment for natives. The higher wage rate of natives compared to migrants makes this challenging for private sector firms. This paper analyzes productivity differences between migrants and nationals using detailed industry-level data from Kuwait and Saudi Arabia. Employing an extended Cobb-Douglas production function, we find that migrant workers have a productivity advantage over nationals. Combined with their lower wages, this results in a lower unit labor cost, making it challenging for private enterprises to shift away from relying on expatriate workers. Long-term, GCC economies need to invest in upskilling natives and fostering a competitive labor market to create productive jobs for natives.