July 2013

IZA DP No. 7485: Structural Change in MENA Remittance Flows

published in: Emerging Markets Finance and Trade, 2015, 51(6), 1175-1178

After independence, the GCC countries relied heavily on foreign workers from fellow Arab countries. Thus, remittances flowed from GCC to other countries in MENA. In the 1980s-1990s labor source switched to South Asia; so did the flow of remittances. This paper examines the consequences of the shift in the source of labor by econometrically testing the existence of structural breaks in the flow of remittances in the MENA region. The change in the direction of remittance flows deprived several MENA labor exporters of large sums of foreign exchange, adding significant economic, social and political hardships on non-GCC MENA countries.