The Determinants’ of Workers’ Remittances: A Case Study of the Gulf Cooperation Council (GCC)

Abstract

Workers’ remittances in the Gulf Cooperation Council (GCC) region has significantly contributed towards the development of many countries globally over the past decade. Using remittance flows data from GCC region countries, this study examines the determinants of workers’ remittance by considering internal and external factors. We estimated a gravity model for remittance flows using a variety of existing literature to determine the extent to which macroeconomic factors control the remittance flows from the GCC region. The estimation was based on a variety of panel data from 6 host countries of the GCC region and 5 home countries; two Far East countries namely Philippines and Indonesia, and three Near East countries namely India, Pakistan and Bangladesh. The study found that several factors have a significant effect on remittance flows from GCC region include stock of migrant, inflation rate and exchange rate. The study also provided evidence that GDP of the GCC region have a positive and statistically significant effect on remittance flows. Empirical analysis also demonstrated that level GDP of the Far East and Near East regions responded negatively to remittances, however, this was not significant. Evidence indicated that workers’ remittances responded on the level GDP of GCC region rather than GDP of other regions. The study also found factor like physical distance between host and home countries proved to be a poor proxy to determine the remittance flows.