Labor Demand and Economic Growth in Saudi Arabia

Abstract

This study investigates the relationship between labor demand and economic growth in Saudi Arabia for the period 1990-2008 by using fully modified ordinary least squares (FMOLS) approach. The study analyzes also the unemployment rate and its development in the economy for men and women and economic sectors. Also, the study measures the effects of the components of economic growth represented in capital formation, government expenditure, total exports and total imports in labor demand by using FMOLS. The analysis is based on time series from 1990 to 2008. Time series properties of the processes that generated the data have been assessed to specify the order of integration for each series. The empirical results obtained show that, there are a positive and significant relationships between the labor demand and real income, real investment, real government expenditure and real value of exports. On the other hand, there are negative and significant relationships between labor demand and the real value of imports. It is expected that the findings of this study could be utilized by the government for their future follow-up and reassessment of economic development programs in Saudi Arabia