The Role of International Labor Force in the Omani Economy: Trends, Shocks, and Implications

Despite the GCC countries experiencing rapid economic growth, they continue to grapple with a domestic issue: the unemployment of their own citizens. Given the substantial influx of international workers into the GCC nations, including Oman, it becomes imperative to investigate the correlation between international workers and both short-term and long-term economic growth as well as measure the impact of different labor-related shocks (e.x. shock from a sudden drop or rise in the quantity and quality of international workers) and policies on the Omani economy. Overall, this research proposal aims to contribute to a better understanding of the relationship between the demand for foreign workers and economic development, and to inform policy decisions in Oman that can enhance economic growth, improve labor market conditions, and promote sustainable development in the country. Specifically, the proposal investigates the relationship and assesses the impact of shocks that are related to the international workers market in Oman, considering separately skilled and unskilled workers, and hydrocarbon GDP and non-hydrocarbon GDP. Several Auto-Regressive Distributed Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL) models will be applied to examine these relationships at aggregated and disaggregated levels. These models will be employed due to their ability to capture both short- and long-run dynamics in a single framework, making them well-suited to the study of the relationship between international workers demand and economic development. To forecast and analyze the potential benefits and costs of foreign-labor-related economic reforms, the unique feature of this project is that it fully employed Oxford Economics Model developed by Oxford Economics, which is the world?s leading globally integrated economic model. Results are important for government entities and the private sector as they will reveal best practices to mitigate the downside effects of negative and positive shocks in the labor market. Ultimately, findings serve as a roadmap for policymakers in Oman and throughout the GCC nations, offering insights into the correlations and dynamics within the labor market. These insights can be instrumental in launching impactful labor market reforms and fostering employment opportunities for citizens.