The Determinants of foreign worker remittances in the Kingdom of Saudi Arabia

Abstract

This paper investigates foreign worker remittances in the Kingdom of Saudi Arabia (KSA). Historical patterns and some summary statistics on total and per worker remittances are firstly discussed to gauge the performance of these remittances through the sample period. The study then proceeds to a discussion of the possible determinants of worker remittances from the KSA and to measure their impact on the volume of remittances per worker from the Kingdom. Variables used in the study as determinants include the real GDP income variables, wages per worker, returns and parity conditions, plus some composite indices pertaining to socio-economic factors and to risk indicators in the Kingdom. Results obtained generally point to a number of facts. The per capita GDP activity variable has a positive relationship to levels of per worker remittances showing that remittances from the Kingdom are pro-cyclical increasing during booms and declining during recessions. Wages also turn out to be a significant positive determinant of remittances per worker from the Kingdom. Differential return variables have the expected inverse relationship with the dependent variable, while results relating to the various political, economic and financial risks� variables indicate that the variables measuring the degree of government stability and the degree of law and order, have a significant impact on remittances. Using composite risk variable led to responses being generally in the expected directions with per worker remittances having a significant negative relationship to socio-political stability.