The political economy of migration policies in oil-rich Gulf countries

Abstract

We study the political economy of migration policies in the oil-rich and non-democratic Gulf countries where different economic groups have divergent preferences over the migration policy choices. We consider two policy dimensions: a) the number of migrants allowed into the country and b) whether to discourage remittances by migrants. The inflow of migrant workers leads to a wage decline that harms citizen workers, while capitalists and oil rent earners benefit. When foreign exchange is remitted out of the economy, the real exchange rate depreciates. The remittance outflow benefits oil rent earners, while capitalists and workers lose. The autocratic ruler chooses a migration policy mix and an oil-rent redistribution scheme to maintain critical political support to avoid public rage. Our results explain differences in migration policies and redistribution schemes across Gulf countries. The model also offers predictions regarding the development of migration policies if these countries were to become more democratic.