What reduces unemployment rates in the Gulf Cooperation Council countries: growth, flexible labor markets, or social contract?

Abstract

ABSTRACT In this research, we empirically examine the structural and macroeconomic determinants of unemployment rates in the Gulf Cooperation Council countries, distinguished by age and gender. We examine several hypotheses regarding the influence of long-run economic growth, labour market flexibility, and the social contract on unemployment rates. Using panel data for the period 2000–2020 and country and time fixed effects estimation methodology, empirical evidence shows that long-run growth reduces unemployment rates regardless of age and gender (except for female youth unemployment rate). Wage flexibility reduces most unemployment rates. Urbanization reduces total and male unemployment rates, while population density reduces total and female unemployment rates. In contrast to these determinants, linking pay to productivity, increases female, total youth, and male youth unemployment rates. Openness ratio increases total, total youth, male and male youth unemployment rates but not female and female youth unemployment rates. The paper has important policy implications for reducing unemployment rates in the Gulf Cooperation Council countries.