Applied Economics

ISSN: (Print) (Online) Journal homepage: https://www.tandfonline.com/loi/raec20

Sectoral employment analysis for Saudi Arabia

Fakhri J. Hasanov, Jeyhun I. Mikayilov, Muhammad Javid, Moayad Al-Rasasi,

Frederick Joutz & Mohammed B Alabdullah

To cite this article: Fakhri J. Hasanov, Jeyhun I. Mikayilov, Muhammad Javid, Moayad Al-Rasasi,
Frederick Joutz & Mohammed B Alabdullah (2021) Sectoral employment analysis for Saudi
Arabia, Applied Economics, 53:45, 5267-5280, DOI: 10.1080/00036846.2021.1922590

To link to this article: https://doi.org/10.1080/00036846.2021.1922590

© 2021 The Author(s). Published by Informa View supplementary material

UK Limited, trading as Taylor & Francis
Group.

Published online: 11 Aug 2021. Submit your article to this journal

Article views: 4442 View related articles

View Crossmark data Citing articles: 7 View citing articles

Full Terms & Conditions of access and use can be found at

https://www.tandfonline.com/action/journalInformation?journalCode=raec20
APPLIED ECONOMICS
2021, VOL. 53, NO. 45, 5267–5280
https://doi.org/10.1080/00036846.2021.1922590

ARTICLE

Sectoral employment analysis for Saudi Arabia

Fakhri J. Hasanova, Jeyhun I. Mikayilova, Muhammad Javid, Moayad Al-Rasasib, Frederick Joutzc
and Mohammed B Alabdullahd
a
King Abdullah Petroleum Studies and Research Center, Riyadh, Saudi Arabia; bInternational Monetary Fund, Washington DC, USA; cThe
George Washington University, Economics Washington, DC, USA; dSaudi Central Bank, Riyadh, Saudi Arabia

ABSTRACT KEYWORDS
This study aims to explore the impact of output and wage on labour demand in Saudi Arabia at Employment; wage; output;
sectoral level. We applied cointegration and equilibrium correction methods to the time-series cointegration; ecm
data of 10 sectors over 1995–2016 using the demand side framework and considering the JEL CLASSIFICATION
structural breaks in the data. We found that in the long run, the employment is positively affected J20; J23; J43
by the output while the impact of the wage was negative in all sectors. In the short-run, employ­
ment growth in all sectors reacted to the wage growth except for the government sector. While
only some sectors responded to the output growth, we also found that employment can adjust to
the desired equilibrium level in all sectors but time horizon for the adjustment processes varies
across the sectors. Differences in estimated coefficients imply that policies should be sector-
specific as a ‘one-fits-all’ policy would fail to consider the sectoral specificities.

I. Introduction
Achieving a desired level of employment is central rate of Saudi nationals in the oil and gas sectors
to macroeconomic policy. Regulators must under­ from 40% to 75%; raise the private sector’s contri­
stand employment dynamics in order to design bution to GDP from 40% to 65%; and grow the
appropriate policies and test their impact. Healthy share of non-oil exports in non-oil GDP from 16%
employment levels not only benefit household to 50% (SV 2030; NTP, 2019). To achieve these and
income and the production factor of firms, but other targets, the authorities should conduct
also help maintain sustainable economic growth a comprehensive examination of employment in
and reduce poverty. Employment is a central ele­ the country; this in turn necessitates an assessment
ment in the concept of inclusive growth (UN 2006; of the relationships between employment and its
Bhalla 2007). Therefore, the dynamics of employ­ main determinants.
ment determinants have been the subject of con­ Like other emerging economies, Saudi Arabia
siderable research to date. faces constant structural change and large, persis­
As the Saudi Arabia proceeds with historic tent differences between sectors in productivity and
reforms, the question of what drives employment earnings. In the context of the Kingdom, microe­
is crucial for the country’s policymakers. Saudi conomic dynamics, government support programs
Vision (2030) (SV 2030), the government’s strate­ for certain economic activities, sectoral growth pat­
gic roadmap for the Kingdom’s future develop­ terns, and capital-enhancing technological pro­
ment, and related initiatives, such as the National gress can have widely varying impacts on
Transformation Program, establish numerous employment across sectors. From a policy perspec­
employment-related schemes and set targets for tive, sector-level growth and employment trends
employment levels. Between 2016 and 2030, SV have important implications for future develop­
2030 aims to reduce unemployment from 11.6% ment strategies. Therefore, the objective of this
to 7%; expand women’s participation in the work­ research is to investigate the impacts of the primary
force from 22% to 30%; increase the employment determinants of employment – namely, GDP and

CONTACT Muhammad Javid muhammad.javid@kapsarc.org King Abdullah Petroleum Studies and Research Center, Riyadh, Saudi Arabia
Supplemental data for this article can be accessed here.
© 2021 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-
nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built
upon in any way.
5268 F. HASANOV ET AL.
wages – in different sectors of the Saudi Arabian
economy.
We consider 10 economic sectors: agriculture
and forestry (AGR); construction (CON); distribu­
tion and retail, wholesale, hotels and catering
(DIS); finance, insurance and business services
(FIBU); government services (GOV); non-oil man­
ufacturing (MANNO); non-oil mining
(MINOTH); other services (including community,
social and personal services) (OTHS); transport,
storage and communication (TRACOM); and uti­
lities: electricity, gas and water (U).
Our analysis addresses two primary research
questions:
For each sector, what are the impacts of real
wages and output on employment in the long and
short run?
For each sector, how quickly does employment
return to its long-run equilibrium path after deviat­
ing in the short run?
Output, value added, income, production, and eco­
nomic activity are interchangeably used in the litera­
ture. To be consistent throughout the paper, we use
the word of output. We apply cointegration and equi­
librium correction methods to time-series data for the
above ten sectors in Saudi Arabia for 1995 through
2016. Demand-side modelling of employment pro­
vides a theoretical foundation for this research.
We find that there is a long-run relationship
between employment and its determinants in all
the 10 sectors. In other words, the employment is
positively affected by the value added while the
impact of the wage is negative across the sectors
in the long run. It is also found that growth rates of
the values added, and wage have statistically sig­
nificant positive and negative impacts, respectively,
on the employment growth across the sectors in the
short run. Finally, we find that the short-run
dynamics in the employment converges to the
long-run relationship in the all sectors since the
sectoral speed of adjustment (SoA) coefficients are
statistically significant and negative, indicating that
the short-run dynamics converge with the long-run
relationships in all sectors. However, the magni­
tudes of the effects vary across the sectors due to
their idiosyncratic features.
The results of this study offer policymakers
quantitative insight into how the key determinants
of employment, such as income and wages, can
affect sector-level employment in Saudi Arabia, in
both the long and short run. The findings can also
help authorities seeking to balance employment
across sectors. Furthermore, our observation that
the impacts of output and wages vary across the 10
sectors highlights the importance of designing and
implementing economic policies at the sectoral
level and the shortcomings of a ‘one size fits all’
approach, which would fail to consider the distinct
characteristics of each sector.
This research contributes to the existing litera­
ture on employment in Saudi Arabia in the follow­
ing ways. First, this research relies on the
theoretical foundation and investigates employ­
ment effects of both output and wages, whereas
earlier studies considered only the former.
Second, we evaluate the relationships between
employment and these two drivers at the sector
level for 10 primary sectors of the Kingdom’s econ­
omy. Third, we use up-to-date econometric tech­
niques and tools including Autometrics, which
provides parsimonious and theoretically interpre­
table specification and accounts for any policy and/
or regime changes and the stability of the estimated
coefficients.
The rest of the paper is structured as follows.
Section II provides a brief literature review and
section III discusses labor market structure in
Saudi Arabia. Theoretical framework is provided
in section IV. Section V presents the data and
econometric methodology used. The estimation
results and discussion of the findings are provided
in section VI and VII, while section VIII concludes
the study and provides policy recommendations.
II. Literature Review
In this section, we review relevant literature on the
determinants of employment, especially economic
output and wages, in Saudi Arabia. According to
the existing literature, the most common factors of
employment are labour costs (i.e. wages) and eco­
nomic output (e.g. Nickell 1984; Barker and
Peterson 1988; Pesaran, Pierse, and Kumar 1989).
Other explanatory variables can also be included in
employment analysis, such as exchange rates
(Bruno, Falzoni, and Helg 2004), inflation (e.g.
Loboguerrero and Panizza 2003; Skare and
Caporale 2014), trade (e.g. Freeman 2004; Bruno,

Falzoni, and Helg 2004), oil prices (Papapetrou
2001; Uri 1996; Davis and Haltiwanger 2001), and
taxation (e.g. Nickell 2003; Bassanini and Duval
2006).
To the best of our knowledge, only few such
studies exist for the Kingdom.1 These studies
include Alkhateeb et al. 2017a, b, c, d); Khodeir
and AL Nuwaiser (2016), and Aljebrin (2012).
Alkhateeb et al. (2017a) assess the role of financial
market development in job creation in Saudi
Arabia by examining annual time-series data for
1980 to 2015. The authors model employment as
a function of total credit to GDP, remittances out­
flows, human capital index and investment. The
authors also consider Saudization by measuring it
with a dummy variable, which takes unity after the
implementation of the policy in 1985 and zero
prior to 1985. The results of their ARDL bounds
testing approach indicate that in Saudi Arabia,
financial market development, Saudization, and
investment tend to promote employment, whereas
outflow remittance and human capital index erode
it (though the latter was found statistically insignif­
icant). This research does not consider either out­
put or wages.
Another paper by Alkhateeb et al. (2017b) inves­
tigates the role of oil price fluctuations and eco­
nomic growth in employment in Saudi Arabia,
again examining annual data from 1980 to 2015.
The authors measure the symmetric and asym­
metric impacts of oil prices on employment using
linear and non-linear ARDL models. The para­
meter estimates show that oil prices and economic
growth each have statistically significant positive
effects on generating more jobs within the
economy.
A third study by the same authors examines the
impacts of oil revenue, government expenditures,
and economic growth on employment in Saudi
Arabia from 1991 to 2016 (Alkhateeb et al.
2017c). Based on the results of a Johansen cointe­
gration test, they conclude long-run relationships
between employment and considered explanatory
variables. In addition, the authors find Granger-
causality running from oil revenue, public spend­
ing, and economic growth to employment over the
1
There are studies analysing the link between economic growth and unemployment in Saudi Arabia (e.g. Al-Habees and Rumman 2012; Khrais and Al-Wadi
2016; Abou Hamia 2016). Moreover, a few studies (e.g. Alotaibi 2017) also describe labour market in Saudi Arabia without doing quantitative assessments. We
do not consider these studies here as they are not in line with the objective of our research.
APPLIED ECONOMICS 5269
long run whereas in the short run, only oil revenues
and public spending cause employment.
Alkhateeb, Sultan and Mahmood (2017d) also
examine whether trade openness, government
spending on education, and economic growth
influence employment in Saudi Arabia, once more
examining annual time-series data covering
1980–2015. The results obtained from ARDL esti­
mations reveal that all these variables have positive
long-run impacts on employment.
Khodeir and AL Nuwaiser (2016) investigate the
determinants of industrial employment in Saudi
Arabia. They model industrial employment as
a function of foreign direct investment (FDI), infla­
tion (measured by consumer price index), and
exports as a percentage of gross domestic product
(GDP). The authors utilize annual time-series data
spanning from 1990 to 2014 and employ the auto­
regressive distributed lag (ARDL) bounds testing
method developed by Pesaran, Shin and Smith
(2001). Their long run estimates reveal a negative
relationship between FDI and employment. On the
other hand, the study concludes that higher exports
and inflation have statistically significant positive
impact on employment. In the short run, all vari­
ables have negative but statistically insignificant
impacts on employment. The study does not con­
sider the main theoretically predicted determinants
of employment, namely, output and wages.
Aljebrin (2012) examined the determinants of
labour demand in Saudi Arabia for the period
1990–2008 by using fully modified ordinary least
squares (FMOLS) approach. He found that real
income, investment, government expenditure and
exports have significant positive, while import has
negative impact on labour demand in Saudi Arabia.
None of the studies above discuss why wages,
one of the theoretically articulated determinants of
employment, have not been considered. The
authors also do not explain why GDP growth,
rather than GDP level, is considered in the analysis.
Additional research analyzes the link between
economic growth and unemployment in Saudi
Arabia based on Okun’s law (e.g. Al-Habees and
Rumman 2012; Khrais and Al-Wadi 2016; Abou
Hamia 2016). A few other studies (e.g. Alotaibi
5270 F. HASANOV ET AL.
2017) describe employment in the Kingdom but do
not apply any statistical and/or econometric tools
to estimate the relationships in the labour market.
Due to the lack of empirical research that models
employment in Saudi Arabia by considering its
theoretically articulated determinants, we extend
this review to studies of other economies that
explore the relationships between employment
and its drivers. These studies are documented in
Appendix A of the online supplementary file.
In concluding the literature review, we offer
three remarks. First, to the best of our knowledge,
few studies exist that investigate employment in
Saudi Arabia. Second, they do not analyse wages
and consider output growth instead of output level
for their long-run analysis. Third, the studies of
other economies reviewed in Appendix A and
those in section 2 confirm that economic output
and wages are viewed as the main determinants of
employment in prevailing empirical analysis.
Therefore, this research contributes to the exist­
ing literature by modelling the long-run and short-
run impacts of economic output and wages on
employment for 10 sectors in Saudi Arabia. The
results of our empirical analysis can help inform
policymakers regarding the extent to which eco­
nomic output and wages impact employment in
the long and short run.
III. Labour Market Structure in Saudi Arabia
There are many features characterizing labour
market in Saudi Arabia. First, the public sector
tends to absorb the large share of nationals entering
the market, while the private sector relies heavily
on foreign labour. On average, citizens usually have
better education level compared to foreigners and
prefer working on the public sector, where they are
well-paid, have job security, have more benefits,
and work less hours compared to work in the
private sector. Most of expats usually are employed
in the private sector and concentrated in sectors
such as wholesale and retail, agriculture, trade,
personal services, transport, and construction. Table 1. Wage gap between nationals and foreigners, SAR.
Expats working in these sectors usually are low- Overall wage gap 2019Q16427
skilled and paid less wages; they also may work for Governmental
longer hours. Second, significant wage gap in the Private wage gap 3039 3023 3027 3164 2996 2635
private sector shifts labour demand towards expats Source: General Authority for Statistics, Haver Analytics, and authors
as Saudis are paid higher than non-Saudis. Indeed,
there is also significant wage gap between nationals
and foreigners working in the public sector as
Table 1 documents.
Third, even though economic participation rate
has been increasing for Saudi, it is still low espe­
cially for females; available statistics for 2020Q2
indicates that only 48.8% of Saudis participate
compared to 40.3% in 2017Q2. Female labour
force participation increased from 17.4% in
2017Q2 to 31.4% in 2020Q2. Despite this improve­
ment, it remains low compared to male participa­
tion rate of 65.6% in 2020Q2. Finally, there is an
empirical evidence suggesting the presence of skill
mismatches in the labour market as citizens may
not be well equipped with skills that are needed by
the private sector (International Monetary Fund
2013).
In order to foster job creations for nationals, the
authorities over the past years have implemented
various policies promoting employment in the pri­
vate sector. For example, Hafiz programme was
launched to support nationals seeking for jobs
with monthly allowance of SAR 2000 for
a maximum period of one year. Nitaqat pro­
gramme aiming to increase the number of
nationals working in the private sector. This pro­
gramme also imposed sanctions on firms not hiring
nationals. While there is a minimum wage for
nationals working the public sector about SAR
4,000 there is no wage floor for foreigners. The
authorities have imposed expats levy on foreigners
and their dependents since mid-2016. Labour mar­
ker reform initiative has gradually increased the
share of Saudi citizen in the private sector. The
Saudi citizen employment in private sector has
grown by an average of 8% per year between 2005
and 2017, while the Saudi citizen employment in
public sector has grown by an average of 4% during
the same period. In November 2020, the authorities
announced easing the restrictions on expats work­
ing in the private sector enable them not only to
2019Q2 2019Q3 2019Q4 2020Q1 2020Q2
6294 6407 6487 6272 5834
1654 1104 1707 887 1902 1125
wage gap
calculations.
 APPLIED ECONOMICS 5271

change their jobs, but also leave the country with­
out their employers’ consent.
Examining the labour market dynamics at sec­
toral level can be quite helpful in understanding the
patterns of overall labour market development in
Saudi Arabia. In Table 2, we report the private
sector employment share and their growth rates.
With the exception of few sectors, private sector
employment is dominated by expatriates. Table 2
indicates that the dependency of private sector of
Saudi economy on foreign labour force has
declined over the time and proportion of Saudi
employed in all sectors has increased between
2005 and 2017. However, the rate of employment
restructuring in all the sectors is very slow. Few
sectors of the economy such as Agriculture,
Manufacturing, Construction, Distribution,
Transport and Communication, Other services
are still dominated by foreign labour force, result­
ing in high unemployment among the rapidly
growing Saudi labour force. Only in Mining and
utility sectors witnessed greater Saudi employment
than any other sectors. Overall proportion of Saudi
labour force in private sector has increase from
11.6% in 2005 to 18.6% in 2017.
At comparable levels of education, private sector
wages are lower for non-Saudi workers than for
Saudis. This is the main reason for the high pro­
portion of foreign workers in the private sector
observed from Table 2. Easy access to low-skilled
foreign workers with low wages has meant that
sectors such as wholesale and retail trade, personal
services, transport, and construction have been the
main drivers of private sector growth2 Increasing
trend of proportion of Saudi labour share and
drastically increasing growth rates of Saudi labour
forces in all sectors is the result of labour market
reforms in Saudi Arabia.
IV. Theoretical Framework
By following studies such as Lewis and MacDonald
(2002), Dowrick and Wells (2004), and Hutchings
and Kouparitsas (2012), we use standard profit
maximization problem for derivation of labour
demand function. The profit maximization pro­
blem can be written as follows:
maxL;K πt ¼ pt Yit wt ð1 þ τt ÞLt rt Kt (1)
Subject to a constant return to scale Cobb-Douglas
type production function (Cobb and Douglas, 1928):
Yt ¼ AKtα L1t α
(2)
where πt is profit at time t, pt is output price, Yt is
output, wt is nominal wages, τt is the tax rate; Lt is
employment, rt is the rental rate of capital, Kt is
capital; A is Hicks-neutral technical change.
Substituting (2) in to (1):

Table 2. Private sector employment, growth rate and share.

Growth rates, % per annum % share in total employment
Sector 2005–2009 2010–2014 2015–2017 2005 2010 2015 2017
AGR S 0.48 21.98 0.51 2.17 1.80 2.72 3.18
NS 10.46 6.97 −4.49 97.83 98.20 97.28 96.82
MIN S −4.79 19.27 0.61 67.14 59.99 76.14 80.01
NS 4.48 −3.6 −6.27 32.86 40.01 23.86 19.99
MANNO S 3.59 26.52 −1.33 11.9 12.10 21.79 23.16
NS 5.07 2.75 −3.74 88.1 87.90 78.21 76.84
U S −7.61 79.11 −1.33 45.51 37.50 80.05 81.21
NS 2.4 −8.45 −2.18 54.49 62.50 19.95 18.79
CON S 2.02 37.95 1.55 8.77 6.71 11.26 12.75
NS 12.96 14.02 −2.94 91.23 93.29 88.70 87.25
DIS S 0.58 28.12 −33.3 11.21 12.59 20.18 22.94
NS 0.57 6.12 −33.3 88.79 87.41 79.82 77.06
FIBU S 8.28 99.73 4.22 30.29 9.55 43.81 49.53
NS 7.54 −6.78 −3.49 69.71 90.45 56.19 50.47
TRACOM S 113.46 65.5 −33.3 15.63 15.30 21.00 24.29
NS 120.96 8.6 −33.3 84.37 84.70 79.00 75.71
OTHS S 5.64 94 7.68 14.67 31.61 21.71 23.94
NS 4.56 173.6 2.81 85.33 68.39 78.28 76.06
Total Labour Force S 2.33 28.5 3.06 11.63 10.37 16.38 18.60
NS 7.78 8.79 −2.12 88.37 89.63 83.62 81.40
Note: S = Saudi Employment, NS = Non-Saudi Employment, MIN = Mining. Data Source: SAMA (2019) (2019).

2
IMF Country Report No. 13/230
5272 F. HASANOV ET AL.

� �
maxL;K πt ¼ pt AKtα L1it α wt ð1 þ τ t ÞLt rt Kt using cost minimization approach. Additionally,
equation (8) is similar to that of Peterson (1988)
(3)
and Baker et al. (2001).
The first order necessary condition for profit max­ Again, following the studies above, short run
imization with respect to labour implies @π @Lt ¼ 0,
t
equation, i.e. Equilibrium Correction Model
which using (3) can be expressed as below: (ECM) specification in a general form can be spe­
cified by introducing Equilibrium Correction Term
wt ð1 þ τt Þ ¼ Apt ð1 αÞKtα Lt α
(ECT) that is one-period lagged residuals of the
1
¼ AKtα L1t α ð1 αÞpt (4) long-run equation, lagged first differences of log
Lt employment, contemporaneous and lagged first
Substituting (2) into (4): differences of log of output and log of real wage:

wt ð1 þ τt Þ Yt Δett ¼ φ½ett αo α1 gvat 1 α2 wt 1 α3 ðt 1Þ�þ

¼ Að1 αÞ
pt Lt
Taking natural logarithms of (5) and solving for
labour (Lt ) implies:
� �
wt ð1 þ τ t Þ
lnLt ¼ lnðAð1 αÞÞ þ ln Yt ln
pt
(6)
� �
wt ð1 þ τt Þ
lnLt ¼ αo þ ln Yt ln
pt
where αo ¼ lnðAð1 αÞÞ
In equation (7), long run labour demand is
a function of three terms, i.e. a constant, real output
and real wage.
In case of Saudi Arabia, τt ¼ 0 can be considered
as there is no income tax in the country.
Additionally, to capture the technological progress,
we introduce trend component following Pesaran,
Pierse, and Kumar (1989). Finally, we add an error
term (μt ) to equation (7) to make it an econometric
specification. Thus, our final long-run equation for
labour demand gets the following form:
ett ¼ αo þ a1 gvat þ a2 wt þ a3 t þ μt
where αi 0 s are the coefficients to be estimated econo­
metrically. Variables in small letters mean they are in
the natural logarithmic forms. Labour demand rises
(declines) when output is booming (contracting), i.e.
α1 > 0. There is a negative relationship between
labour demand and the cost of it, that is, wage and
hence, α2 < 0. It is theoretically expected that α3 > 0.
Note that Pesaran, Pierse, and Kumar (1989)
derived the same specification as equation (8)
3
In some cases, to get the same span of 1995–2016 data the values of the earlier years for the variables are interpolated using backcasting techniques
(5) 1
X X
þ γ1i Δett i þ γ2i Δgavt i
i¼1 i¼0
X
þ γ3i Δwt i þ εt
i¼0
(9)
Where, φ < 0 represent the speed of adjustment
(SoA), at which actual employment adjusts to its
desired long-run equilibrium level. We will estimate
equations (8) and (9) for the above-mentioned ten
(7)
sectors of Saudi Arabia in the empirical analysis.
V. Data in Brief and Econometric Methodology
Data
We use annual time-series data from 1995 to 2016
for the following variables.
ETi is thousands of employed people in a given
sector.
GVAi is gross value-added (GVA) in a given
sector, measured in millions of Saudi Arabian
Riyal (SAR) at constant 2010 prices.
Wi is real wages in a given sector, measured in
(8) millions of SAR at constant 2010 prices. To obtain
the real values, a sector’s nominal wage values were
divided by its GVA deflator.
Sectoral employment data are taken from Saudi
Arabia General Authority for Statistics (GaStat,
2018), with the exception of government sector
employment data, which come from Saudi
Monetary Authority (SAMA 2019). The sectoral
GVA and nominal wage data are also provided by
GaStat, (2018).3 The sectoral GVA deflators are

calculated using the relevant nominal and real
values, again from GaStat, 2018.
Figure B1 in Appendix B of the online supple­
mentary file illustrates the natural logarithmic
levels and growth rates of employment, output
and wages in each of 10 sectors. Structure of the
employment by sector in terms of share in total,
and growth rate, are documented in Appendix B.
Econometric Methodology
The empirical assessment strategy in this study is as
follows. We first check time series properties of
variables. In the case of non-stationarity of the
variables, we test whether they are cointegrated. If
the variables are cointegrated, then we estimate
long-run and then short-run as well as SoA coeffi­
cients of the relationships. If they are not cointe­
grated, then we will estimate only short-run
coefficients without Equilibrium Correction Term
(ECT). We follow the General to Specific
Modelling (GSM) approach using Autometrics,
a cutting-edge econometric technique, in estimat­
ing short-run relationships (see Hendry, Johansen,
and Santos 2008; Doornik and Hendry 2009;
Doornik 2009; Doornik and Hendry 2018).
Details of the unit root and cointegration tests as
well as long- and short-run estimation methods are
described in Appendix C of the online supplemen­
tary file.
VI. Estimation Results
Unit root tests results
The results of unit root tests indicate that all the
variables are non-stationary at the log levels and
their growth rates are stationary as Table D1 in
Appendix Do f the online supplementary
file presents. For d(gva), the ADF test does not
reject the null hypothesis of unit root in the first
Table 3. Long-run estimation results.
Regressor AGR D CON V DIS D FIBU V
gva 0.93 a 1.06 a 0.27 a 0.65 a
w −0.78 a −0.56 a −0.38 a −0.52 a
C 0.92 0.60 7.87 a 3.51 a
Notes: D DOLS is used, F FMOLS is used, V VECM is used, A ARDL is used; Significance levels: a – 1%, b – 5%, and c – 10%; C denotes Intercept ; The following
pulse dummies are used for the following sectors: DP2007 for TRACOM, DP2008 for CON, DP2009 for OTHS, DP2012 for TRACOM and U, DP2013 for TRACOM,
DP2014 for OTHS and U, DP2015 for CON. DPXXXX takes 1 for the given XXXX year and 0 otherwise; Time trend was statistically significant only in AGR with
the coefficient of 0.03.
APPLIED ECONOMICS 5273
difference of gva in three sectors, DIS, MINOTH
and TRACOM. However, the DF-GLS test (Elliott,
Rothenberg, and Stock 1996) concludes stationar­
ity at 5% significance level for DIS and TRACOM,
while the KPSS test indicates the stationarity for
d(gva) in MINOTH. We note that as Juselius
(2006) discusses, stationarity at second differenced
form does not seem reasonable when the sample
size is smaller than 30 observations. Thus, we con­
clude that all the variables are non-stationary at
their log-levels, but their growth rates are station­
ary. In other words, all variables under considera­
tion follow I(1) process. The various cointegration
tests reported in Table D2 of Appendix D confirm
the existence of long-run relationship in all 10
sectors.
Long-run estimation results
Table 3 shows the long-run estimation results of
employment equation (8) by sector.
The signs of the estimated coefficients are posi­
tive for value-added and negative for wages, in line
with the theoretical expectations discussed in
Section 4. The results show that value-added and
wages have statistically significant long-run
impacts on employment in all sectors. The impact
of value-added ranges from 0.23 for non-oil mining
to 1.28 for government services. For wages, results
likewise vary across sectors and are lowest (in
absolute value) for government services (−0.26)
and highest (in absolute value) for the non-oil
mining sector (-1.61).
Short-run estimation results
The short-run estimation results (i.e. the final ECM
specifications) are reported in Table 4. The esti­
mated elasticities are all statistically significant.
Additionally, all the post-estimation tests results
GOV D MANNO F MINOTH D OTHS F TRACOM V UA
1.28 a 0.27 c 0.23 a 1.11 a 0.65 a 0.42 a
−0.26 a −1.53 a −1.61 a −0.60 a −0.85 a −0.49 a
−6.09 a 16.97 b 21.92 a 1.47 −7.54 5.68 a
5274 F. HASANOV ET AL.

are in favour of the validity of the selected final due to scale effect and substitution effect as articu­
ECM specifications. Moreover, the estimated para­ lated in the labour demand theory (see e.g.
meters, including SoA coefficients, have the Ehrenberg and Smith 2016, Chapter 4). We also
expected signs. note that employment responds differently across
sectors, primarily due to two factors: the idiosyn­
crasies of a given sector and its stylized features in
VII. Discussion of the findings the Saudi economy.
Our results indicate that value-added and wages Four sectors – agriculture, construction, govern­
have statistically significant impacts on employ­ ment services and other services – exhibit a nearly
ment for all 10 sectors in the long run. As Table 3 one-to-one relationship between employment and
presents, we found elastic and inelastic long-run value-added in the long run. For these sectors, a 1%
elasticities for employment with respect to both increase in value-added will result in an equivalent
value-added and wages across the sectors, while rise in employment.
all the short-run elasticities are inelastic (with one Government services and non-oil mining exhibit
exception of value-added for agriculture), as shown the highest and the lowest value-added elasticities,
in Table 4. This corroborates the economic theory respectively. We offer three explanations for the
that impacts are usually expected to be higher in former. First, the government sector is heavily
the long-run than in the short-run. Generally, our labour intensive. Hasanov et al. (2020) estimated
empirical findings can be explained through the that the labour and capital elasticities of value-
Hicks–Marshall laws of derived labour demand added are 0.48 and 0.21, respectively, in the
Table 4. Final ECM specifications by sector.
Variable AGR CON DIS FIBU GOV MANNO MINOTH OTHS TRACOM U
ECTt 1 −0.568a −0.260a −0.966a −0.485b −0.198b −0.130a −0.134a −1.441a −0.095a −0.348a
C 0.035a −0.016 0.033a 0.003 0.007 0.021 0.034a 0.001 0.047a
Δett 1 −0.169a 0.109 c
Δett 2 −0.232b 0.435a
Δgva 1.984a 0.190 c 0.686a 0.759 c 0.550a
Δgvat 2 0.229b
Δw −0.785a −0.699a −0.534a −0.393a −0.208b −0.189b −0.456a −0.087 c −0.190a
Δwt 1 −0.134a 0.122
D(DP2008) −0.152a
DP2003 −0.271a 0.073b
D(DP2009) −0.145a −0.074b
DP1983 −0.399a
DP1984 −1.032a
DP2013 −0.091a −0.162b 0.075a
DP2012 −0.139a
DP2008 0.061a
DP2007 0.109a
DB1213 −0.211a
DP2009 0.144b
DB1011 −0.348a
DB0910 −0.188a
DB1415 0.172a 0.204a
DP2001 0.182b
DP2002 0.122a
DB1314 −0.082a
R2 0.974 0.931 0.986 0.921 0.819 0.939 0.919 0.724 0.856 0.926
Adjusted R2 0.967 0.897 0.976 0.901 0.776 0.921 0.894 0.618 0.801 0.898
SER 0.027 0.039 0.016 0.043 0.014 0.070 0.033 0.038 0.025 0.049
SC 0.282 (0.759) 0.849 1.184 0.908 2.607 0.572 0.726 1.247 0.345 0.391
(0.457) (0.350) (0.427) (0.107) (0.572) (0.501) (0.325) (0.716) (0.686)
HET 0.089 1.096 0.555 0.599 1.260 0.644 1.470 0.923 0.506 0.627
(0.985) (0.418) (0.778) (0.625) (0.324) (0.734) (0.254) (0.497) (0.767) (0.706)
JB 2.907 0.552 2.864 0.470 5.720 4.915 0.441 0.274 0.858 2.114
(0.234) (0.759) (0.239) (0791) (0.057) (0.086 (0.802) (0.872) (0.651) (0.348)
RR 0.376 1.044 0.102 0.595 0.250 2.681 2.414 0.161 0.000 2.275
(0.551) (0.329) (0.757) (0.454) (0.624) (0.114) (0.141) (0.695) (0.991) (0.157)
Notes: SER = Standard Error of Regression; SC = Breusch-Godfrey Serial Correlation LM Test; HET = White test for Heteroscedasticity; JB = Jarque–Bera normality
test; RR = Ramsey’s Mis-specification test; p-values are in parentheses; d = difference operator.

production function of the government service
sector in Saudi Arabia for the period 1996 to
2016. The labour elasticity being more than twice
higher of the capital elasticity indicates that the
sector’s activity is mostly driven by labour. Hence,
any changes in sector’s activity or output will be
associated with corresponding changes in sector’s
employment. Second, as in other developing
economies, the government service sector exhibits
a room for efficiency improvement in Saudi Arabia.
Empirical studies, such as Al-Faris (2002), Joharji
and Starr (2010), Alshahrani and Alsadiq (2014),
and Eid and Awad (2017) highlight the inefficien­
cies in various government services. Saudi Vision
2030 (SV 2030), the Kingdom’s masterplan for
development, particularly the Fiscal Balance
Program includes numerous initiatives to increase
government efficiency (FBP 2017). Additionally,
the SV 2030 Human Capital Program identifies
increasing government efficiency and providing
world-class government services as its key priori­
ties. Such inefficiency means that additional gov­
ernment services activity requires more than the
optimal number of government employees and
thereby, elastic output elasticity of employment.
Third, Saudis prefer working in government sector
to private sector. Official statistics show that on
average, Saudis comprised only 13.2% of private
sector employment from 2005 to 2016 (SAMA
2019). Additionally, an official labour survey con­
ducted in 2016 shows that the public sector
accounted for 67% of total employment of Saudi
Nationals (SLMR 2016). According to Ministry of
Civil Service via SAMA (2019), share of nationals
in the government-sector employment increased
from 78.9% in 1995 to 94.6% in 2016 with the
period average of 90.1%. All these numbers show
that nationals are heavily dominate in GOV sector
and given that Nitaqat policy encourages haring
and maintaining a high level of nationals, expand­
ing government activities will be associated with
more increase in the sector’s employment.
For non-oil mining, we attribute the observed
low value-added elasticity of employment and the
highest wage elasticity of employment (see Table 3)
with the commonly accepted fact that mining is
a less labour-intensive economic activity. This
4
For the methodologies to calculate labour share see Schneider (2011), Giandrea and Sprague (2017), inter alia.
APPLIED ECONOMICS 5275
implies that factors other than employment, such
as capital and total factor productivity, drive the
development of the sector and that its expansion
will be associated more with such other variables,
and also that the labour absorption capacity of the
sector is limited. This general observation is also
the case for Saudi non-oil mining sector. It is worth
considering that the average shares of non-oil
mining employment in total and non-oil employ­
ment were 1.4% and 1.5%, respectively, and even,
the maximum number of the shares were 1.9% for
the studied period of 1995–2016 according to the
available statistics (SAMA 2019). Although we
could not find any study that estimated labour
elasticity of output in the non-oil mining sector in
Saudi Arabia, which would provide an information
about how labour is important in the sector’s activ­
ity, calculation using available data shows that
labour share (employment compensation) in
value added declined from 37.3% to 20.8% in
2016 with the period average of 25.5%.4 These
statistics point out two main things. First, low
labour share indicates that production factors
other than employment such as capital play impor­
tant roles in the activity of non-oil mining sector.
Resultantly, any changes in the sector’s activity will
be associated with more changes in the other pro­
duction factor, say capital than in employment.
Simply because this is not labour that mainly drives
sector’s activity and consequently inelastic output
elasticity of employment originates. Second,
declining labour share, which implies growing
capital share, shows that employers in the sector
has substituted labour with capital over time. This
is consistent with the theoretical articulation
emphasizing that substitution effect, which usually
happens in the long run is one of the reasons for
obtaining elastic wage elasticity of employment
(see e.g. Ehrenberg and Smith 2016, Chapter 4).
The intuition here is that since sector’s activity/
output is mostly determined by capital not employ­
ment, employers in the sector will respond to wage
increases by firing more employees and tending to
replace them with capital over time. Usually, the
mining sector is capital-intensive, and activities are
driven mainly by advanced technologies that
require specialized skilled labour. As a result,
5276 F. HASANOV ET AL.
wages level in the sector are usually higher than
that in other sectors. This common sense under­
standing of the sector is also true for the Saudi
Arabian case: the average wage level in the sector
comes the second highest after the government
sector during the studied period 1995–2016.
Thus, a capital-intensive sector with higher wages,
although labour share is not high, can encourage
employers to substitute employees with capital in
the long run when they face wage increases. This
would be another possible explanation for the elas­
tic wage elasticity of employment in the non-oil
mining sector as it is theoretically articulated (see,
e.g. Ehrenberg and Smith 2016, Chapter 4). Note
that other studies for other countries’ mining sec­
tor also found elastic wage elasticity of employ­
ment. For example, Hamermesh (1996) reports
the elasticity for the British coal mines to be in
the range of −1.0 and −1.4.
Regarding the long-run impact of real wages on
sectoral employment, we find it interesting that sec­
tors, which are less driven by value-added, namely
non-oil mining and non-oil manufacturing, they are
the mostly sensitive to wages (see Table 3). Precisely
speaking, a 1% increase in real wages decreases
employment in these two sectors by around 1.5%
and 1.6%, respectively. Commonly, manufacturing is
labour intensive, and the sector exhibits a tight rela­
tionship between employment and value-added.
However, our estimated value-added elasticity of
employment is small in magnitude (0.27) and this
indicates that the common sense understanding of
the sector might not be the case in Saudi Arabia.
Indeed, this is supported by previous research:
Alkhateeb et al. (2017c) argue that the Kingdom’s
industry sector heavily depends on capital-intensive
technology and Hasanov et al. (2020) estimate the
employment elasticity of value-added being 0.23 for
the country’s non-oil manufacturing sector for the
period 1995–2016. These clearly show that the role
of employment in the non-oil manufacturing activity
in Saudi Arabia is considerably small and conse­
quently, wage plays more role than output in the
formation of the sector’s employment. Therefore,
when wage rate in the sector is raised, then the
employers in the sector can decrease their demand
more than what the wage increase is because this is not
5
For example, the employers, who have more foreigners than national have to pay higher amount of expatriate levy (FBP 2017).
employment but capital and other production factors
that mostly drive the sector’s activity. The substitution
effect between labour and other factors of production
would be another explanation for why labour demand
is more responsive to changes in real wages in the
non-oil manufacturing sector. The discussion above
highlighting the limited role of labour in the sector’s
activity increases the probability that the substitution
effect prevails in the sector. Besides, inspecting the
development paths of wages, employment and value
added in the sector shows that increases (decreases) in
the former one were associated with declines
(increases) in the middle one, but these did not lead
to declines (increases) in the latter one. For example,
real wages declined after 1999 till 2001, while employ­
ment increased considerably in the same period
whereas value added did not demonstrate any notice­
able changes. Or real wage increased noticeably in
2008 and 2010 while employment declined in both
years, but value added did not change its trend. These
may indicate that substitution effect was prevailing
while scale effect, articulating that declines in employ­
ment due to the high wages lead to declines in output,
was less likely the case for the non-oil manufacturing
sector. Another explanation for the elastic wage elas­
ticity of employment in the sector is the following.
Protective government policies and unions’ action
lead to inelastic wage elasticity of employment as
discussed in the labour market literature (see, e.g.
Ehrenberg and Smith 2016, Chapter 4). In this regard,
recall that the Saudi national employment policy,
Nitaqat aims for encouraging and maintaining high
levels of Saudi employment and indirectly discoura­
ging hiring foreigners in the sectors of the economy.5
Non-oil manufacturing sector is heavily dominated
by foreign labour. Precisely speaking, Table 2 above
reports that 77% of the total employment in the sector
is foreigners, which is a quite high number. This
indicates that the flux of foreign labour in the sector
is quite high. Thus, given that Nitaqat is not for
foreigners and they are dominant in the non-oil man­
ufacturing labour market, the employers in the sector
can cut off foreign labour more than what the wage
increase is.
Among the ten sectors, government services
exhibit the least sensitivity of employment to
wages, with elasticity of −0.26. This can be

explained by the above-mentioned preference of
Saudi nationals to work in the government. They
often prefer a public sector job regardless of the
wage level, probably due to the job security, high
level of wage compared to other sector as well as
other allowances and benefits/preferences of being
a government employee. Another fact that more
than 90% of the government sector’s employment
are nationals and Nitaqat policies aim for encoura­
ging and maintaining high levels of Saudi employ­
ment. Combination of these two implies that the
sector would not fire employees mainly nationals at
a greater extent if wages are reduced say due to
economic recession or low oil price and thus low
government revenues
Before concluding the discussion of long-run
findings, it is worthwhile to underscore that employ­
ment levels in non-oil manufacturing and non-oil
mining are found be the least value-added driven
and the most wage sensitive. Together with agricul­
ture, these sectors comprise the bulk of Saudi
Arabia’s non-oil tradable production. Development
of the non-oil tradable industries can help the
Kingdom avoid the so-called ‘Dutch disease’ of over­
reliance on a single sector and boost the SV 2030
export-led growth strategy; thus, these three sectors
deserve more detailed research in future.
Turning to the short-run estimations reported in
Table 4, we highlight the following results. First, SoA
coefficients appear statistically significant and nega­
tive, as expected, for all ten sectors. This indicates
that the long-run relationships of employment to
value-added and wages are stable over time and the
impacts of shocks or changes to the corresponding
long-run relationships are temporary and do not
create permanent deviations. Additionally, the sta­
tistically significant negative SoA coefficients imply
long-run causality running from value-added and
wages to employment. Moreover, the SoA coeffi­
cients for all sectors, with the exception of other
services, fall within the range of (0;-1). Thus, for
these nine sectors, employment takes more than
one year to correct from short-run disequilibrium
back to long-run equilibrium, while requiring less
than a year in the case of other services. (For the
details of correction and overcorrection processes,
see Loayza and Ranciere 2005; Enders 2015, pp. 374,
377–378; Shittu, Yemitan, and Yaya 2012; Olczyk
and Kordalska 2017.)
APPLIED ECONOMICS 5277
Second, wage growth has statistically significant
contemporaneous negative impact on the employ­
ment growth in all sectors, except for the govern­
ment service sector. This indicates that wages play
an important role in shaping employment growth
outside the public sector. As for government ser­
vices, we do not find any contemporaneous or
lagged effects of wage growth to be statistically
significant, in line with the above findings that the
sector exhibits the least long-run sensitivity of
employment to wages. We again believe this
stems from the preference of Saudi nationals for
government employment.
Third, value-added growth has statistically sig­
nificant positive impact on the employment growth
only in five sectors: agriculture, distribution, gov­
ernment services, utilities, and other services. Also,
these positive effects happen contemporaneously.
By combining the long-run and short-run effects of
value-added on employment across the sectors, we
see that the majority of these five sectors also have
quite high value-added elasticity in the long-run.
This implies that employment in these sectors is
responsive to value-added/activities probably
caused by their nature. We do not find any statis­
tically significant positive influence of value-added
growth on employment growth of the remaining
five sectors. Finally, among the ten sectors, agricul­
ture exhibits the most sensitivity in employment
growth to value-added and wages, according to the
short-run estimation results in Table 4.
VIII. Conclusions and Policy Recommendations
Policymakers in any economy benefit from an
advanced understanding of employment dynamics
as they design economic programmes and conduct
relevant monitoring and evaluations. Sustainable eco­
nomic growth also requires the promotion of
a healthy and stable employment market. Therefore,
the determinants of employment dynamics have been
investigated extensively in the literature.
Saudi Arabia has set various targets for eco­
nomic developments under SV 2030. These include
lowering the unemployment rate from 11.6% to 7%
and increasing women’s participation in the work­
force from 22% to 30% by 2030 (Saudi Vision
2030). To successfully achieve these goals and to
better understand employment dynamics in
5278 F. HASANOV ET AL.
general, employment should be modelled as
a function of its determinants. Hence, this study
investigates sectoral employment in Saudi Arabia
in the long and short run utilizing cointegration
and ECM modelling techniques.
Our study provides policymakers with empirical
insight into how employment can be impacted via
its identified determinants – output and wages – in
different sectors of the Kingdom’s economy in both
the long and short run. The results can also help
authorities balance employment growth across sec­
tors. Because the magnitudes of the impacts of output
and wages on employment are different in each sector,
our findings highlight the value of designing and
implementing employment policies at the sectoral
level rather than ‘one size fits all’ aggregate level policy.
The government influence on sectoral employ­
ment dynamics in the private sector may be rela­
tively limited but it can still play a role, primarily by
impacting output and wages. First, the government
can create additional demand for domestically pro­
duced goods and services, both directly and indir­
ectly. For example, by building new schools or
bridges, it increases demand directly for construc­
tion services and indirectly for the manufacturing
and mining products and services used in the con­
struction. Second, the authorities can promote sub­
stitution of imported goods and services with
domestic ones. These measures will raise demand
in targeted sectors, thereby encouraging greater pro­
duction and revenue; resulting increase in economic
activity in turn will boost employment.
This would be also a desirable contribution to
local content, which is one of the main elements of
the economic diversification in Saudi Arabia. Even if
the government can do it only for limited number of
sectors, this can create a multiplier effect, i.e. spread
out to other related sectors in a simplistic Keynesian
view. This measure will increase demand for the
sectors’ goods and services and consequently their
output and employment will raise. The process will
continue until resources, mainly labour and capital,
will rich to their full utilization.
The above measures would improve demand for
goods and services for all ten sectors we examined,
thereby enhancing sector-level employment in the
long run. However, in the short run, the effective­
ness varies across sector. Agriculture and other
services display the highest short-run sensitivity
to the stimulus, followed by government services
and utilities. The distribution and retail sector
exhibits less short-run promise. The other sectors
indicate potential for favourable impact in the long
run only. It appears intuitive that from the above-
discussed measures (i.e. creating employment
through income/economic activity) standpoint,
agriculture and other services sectors seem to be
more promising, public service and utilities sectors
are seemed to be promising, the distribution sector
is seemed to be less promising in the short-run.
While, construction, FIBU, non-oil manufacturing
and mining as well as transport and communica­
tion sectors does not seem favourable in the short
run. However, over the long run all the mentioned
unfavourable sectors also become favourable. It is
quite reasonable to think that the government
investment demand for goods and services pro­
duced locally can lead to the growth of the sectors
in the long run, in particular through infrastructure
development, efficiency and productivity increase,
which all would increase employment.
Turning to the other examined determinant of
employment, labour is a primary expense for the
private sector and higher wages will reduce profit.
Accordingly, private businesses will increase wages
only if they have additional demand for their out­
put requiring additional employment although
there are different conceptual options to increase
production (see, e.g., Hasanov 2020 and refereces
there in). The government can further increase
employment by inducing more of the working age
population to participate in the labour force. This
would increase the supply of labor, which may
lower the market wage rate, leading to an increase
in the demand for labor. Additionally, some rele­
vant measures are outlined in Nitaqat policy to
support employment of Saudi nationals. Also,
increasing employment-subsidy for Saudi employ­
ees financing it by expat levy collections would
increase labour force participation rate of Saudis.
The experience of Kuwait and other GCC countries
should be considered for implementations of such
policies. Moreover, the government can impact the
determinants of the real wage, such as productivity
and price levels to increase employment in the
sectors. Given that the energy price reform (EPR)
is on the policy agenda until 2023 as highlighted in
the Fiscal Balance Program, there is a limited room

to play with the price tool. Instead, the govern­
ment, by using revenues from EPR and other
reforms, may wish to create positive externalities
by further improving economic and social infra­
structure, supporting innovation projects, and
investing human capital, which all lead to an
increase in productivity of the sectors in the long
run. Note that wage-oriented measures would be
the most impactful for MANNO and MINOTH
sectors, the least impactful for GOV and DIS sec­
tors and moderately impactful for the rest sectors
in the long-run. Regarding the effects of the wage-
oriented policy measures in the short-run, mainly
AGR, CON, DIS and OTHS sectors will be affected.
Data availability statement
The data that support the findings of this study are available
from the corresponding author, Muhammad Javid, upon rea­
sonable request.
Acknowledgments
The authors would like to thank to reviewers for their valuable
comments and the participants of the 22nd Dynamic
Econometrics Conference. We are indebted to David
F. Hendry and Jennifer Castle for their constructive com­
ments and suggestions on the KAPSARC discussion paper
version of this manuscript. This is a joint research project
between Saudi Central Bank and KAPSARC. The views
expressed in this paper are those of the authors and do not
necessarily represent the views of their affiliated institutions.
Disclosure confilts of interest Statement
No potential conflict of interest was reported by the author(s).
References
Abou Hamia, M. A. 2016. “Jobless Growth: Empirical
Evidences from the Middle East and North Africa
Region.” Journal of Labor Market Research 49 (3):
239–251. doi:10.1007/s12651-016-0207-z.
Al-Faris, A. F. 2002. “Public Expenditure and Economic
Growth in the Gulf Cooperation Council Countries.”
Applied Economics 34 (9): 1187–1193. doi:10.1080/
00036840110090206.
Al-Habees, M. A., and M. Rumman. 2012. “The Relationship
between Unemployment and Economic Growth in Jordan
and Some Arab Countries.” World Applied Sciences Journal
18 (5): 673–680.
APPLIED ECONOMICS 5279
Aljebrin, M. A. 2012. “Labor Demand and Economic Growth
in Saudi Arabia.” American Journal of Business and
Management 1 (4): 271–277.
Alkhateeb, T., T. Yousef, H. Mahmood, Z. A. Sultan, and
N. Ahmad. 2017a. “Financial Market Development and
Employment Nexus in Saudi Arabia.” International
Journal of Applied Business and Economic Research 15
(21): 165–174. no.
Alkhateeb, T., T. Yousef, H. Mahmood, Z. A. Sultan, and
N. Ahmad. 2017b. “Oil Price and Employment Nexus in
Saudi Arabia.” International Journal of Energy Economics
and Policy 7 (3): 277–281. no.
Alkhateeb, T., T. Yousef, H. Mahmood, Z. A. Sultan, and
N. Ahmad. 2017c. “Trade Openness and Employment
Nexus in Saudi Arabia.” International Journal of Economic
Research 14: 59–66.
Alkhateeb, T., T. Yousef, Z. A. Sultan, and H. Mahmood. 2017d.
“Oil Revenue, Public Spending, Gross Domestic Product and
Employment in Saudi Arabia.” International Journal of Energy
Economics and Policy 7 (6): 27–31.
Alotaibi, M. M. 2017. “Unemployment and Economic Growth in
Saudi Arabia 2000-2015.” International Journal of Economics
and Finance 9 (9): 83–93. doi:10.5539/ijef.v9n9p83.
Alshahrani, S. A., and A. J. Alsadiq. (2014). “Economic
Growth and Government Spending in Saudi Arabia: An
Empirical Investigation.” International Monetary Fund.
IMF Working Paper No. WP/14/3.
Baker, G., Gibbons, R., and Murphy, K. J. 2001. Bringing the
market inside the firm?. American Economic Review, 91(2),
212–218.
Barker, T. and Peterson, W., 1988. The Cambridge multi­
sectoral dynamic model. Cambridge University Press
Bassanini, A., and R. Duval (2006). “Employment Patterns in
OECD Countries: Reassessing the Role of Policies and
Institutions.” Economics Department, Working Papers 46,
OECD, Paris.
Bhalla, S. 2007. “Inclusive Growth? Focus on Employment.”
Social Scientist 35(7) 24–43.
Bruno, S. F., A. M. Falzoni, and R. Helg (2004). “Measuring
the Effect of Globalization on Labour Demand Elasticity:
An Empirical Application to OECD Countries.” KITeS
Working Papers 153, KITeS, Center for Knowledge,
Internationalization and Technology Studies, Universita’
Bocconi, Milano, Italy, revised Feb 2004.
Davis, S. J., and J. Haltiwanger. 2001. “Sectoral Job Creation
and Destruction Responses to Oil Price Changes.” Journal
of Monetary Economics 48 (3): 465–512. doi:10.1016/S0304-
3932(01)00086-1.
Doornik, J. A. 2009. “Autometrics.” J. L. Castle and
N. Shephard edited by. The Methodology and Practice of
Econometrics: A Festschrift in Honour of David F. Hendry.
Chapter 4 in Oxford University Press. Great Clarendon
Street , Oxford. 88–121.
Doornik, J. A., and D. F. Hendry. 2009. Modelling Dynamic
Systems: PcGive 13. London: Timberlake Consultants, .
Doornik, J. A., and D. F. Hendry. 2018. Empirical Econometric
Modelling, PcGive 15. Published by Timberlake Consultants
5280 F. HASANOV ET AL.
Ltd Timberlake Analytics, . The Loft, 2C Blake Mews Kew
Gardens Richmond, TW9 3GA. UK.
Dowrick, S., and G. Wells. 2004. “Modelling Aggregate
Demand for Labour: A Critique of Lewis and
MacDonald.” Economic Record 80 (251): 436–440.
doi:10.1111/j.1475-4932.2004.00200.x.
Ehrenberg, R. G., and R. S. Smith. 2016. Modern Labor
Economics: Theory and Public Policy. 11th Edition ed.
London: Routledge.
Eid, A. G., and I. L. Awad. 2017. “Government Expenditure and
Private Sector Growth in Saudi Arabia: A Markov Switching
Model Analysis.” Economic Issues 22 (2): 83-104 .
Elliott, G., T. J. Rothenberg, and J. H. Stock. 1996. “Efficient
Tests for an Autoregressive Unit Root.” Econometrica 64
(4): 813–836. doi:10.2307/2171846.
Enders, W. 2015. Applied Econometrics Time Series. Hoboken, NJ:
Wiley.
FBP. 2017. Fiscal Balance Program. Saudi Vision 2030. https://
vision2030.gov.sa/en/programs/FBP .
Freeman, R. 2004. “Trade Wars: The Exaggerated Impact of
Trade in Economic Debate.” The World Economy 27 (1): 1.
doi:10.1111/j.1467-9701.2004.00585.x.
GaStat, 2018. GaStat, (2018). General Authority for Statistics
of Kingdom of Saudi Arabia, https://www.stats.gov.sa/en
Giandrea, M. D., and S. A. Sprague, 2017. Estimating the US
Labor Share. Monthly Labor Review. https://www.jstor.org/
stable/10.2307/90001541
Hamermesh, D. S. 1996. Labor Demand. Princeton, New
Jersey: Princeton University press.
Hasanov, F. J. 2021. “Theoretical framework for industrial
energy consumption revisited: The role of demographics.”
Energy Reports, 7, pp.2178–2200
Hasanov, F.J., F. L. Joutz, J. I. Mikayilov, and M. Javid. 2020.
“KGEMM: A Macroeconometric Model for Saudi Arabia”,
KAPSARC Discussion Paper, No. ks–2020-dp04
Hendry, D. F., S. Johansen, and C. Santos. 2008. “Automatic
Selection of Indicators in a Fully Saturated Regression.”
Computational Statistics 33(2): 337–339. 317–335.
Erratum. . doi:10.1007/s00180-008-0112-1
Hutchings, R., and M. Kouparitsas (2012). Modelling Aggregate
Labour Demand. (No 2012-02). Treasury Working Paper.
International Monetary Fund (2013). Labor Market Reforms to
Boost Employment and Productivity in the GCC. Prepared
for the Annual Meeting of Ministers of Finance and Central
Bank Governors held on 5 October 2013 in Riyadh, Saudi
Arabia. (International Monetary Fund, Washington DC).
Joharji, G. A., and M. A. Starr. 2010. “Fiscal Policy and
Growth in Saudi Arabia.” Review of Middle East
Economics and Finance 6 (3): 24–45.
Juselius, K. 2006. The Cointegrated VAR Model: Methodology and
Applications, . Oxford University Press Oxford OX2 6DP.
Khodeir, A. N., and S. N. AL Nuwaiser. 2016. “Does Foreign
Direct Investment Affect Industrial Workers? Evidence
from Kingdom of Saudi Arabia.” International Journal of
Economics and Financial 4 (6): 1858–1864. Issues.
Khrais, I., and M. Al-Wadi. 2016. “Economic Growth and
Unemployment Relationship: An Empirical Study for
MENA Countries.” International Journal of Managerial
Studies and Research 4 (12): 19–24.
Lewis, P. E., and G. MacDonald. 2002. “The Elasticity of
Demand for Labour in Australia.” Economic Record 78
(240): 18–30. doi:10.1111/1475-4932.00036.
Loayza, N., and R. Ranciere. (2005). “Financial Development,
Financial Fragility, and Growth.” The International
Monetary Fund, Working Paper, WP/05/170.
Loboguerrero, A., and U. Panizza. 2003. Inflation and Labor
Market Flexibility: The Squeaky Wheel Gets the Grease.
Inter-American Development Bank, Washington DC.
Nickell, S. 1984. “A Review of “Unemployment: Cause and
Cure”” by Minford Et Al’.” Economic Journal 94(376): 946-953.
Nickell, S. J. (2003). “Employment and Taxes.” CESifo
Working Paper 1109, Center for Economic Studies and
the IFO Institute, Munich.
NTP (2019). National Transformation Program, Kingdom of
Saudi Arabia Vision 2030. https://vision2030.gov.sa/en/ntp
Olczyk, M., and A. Kordalska. 2017. “International
Competitiveness of Czech Manufacturing-A Sectoral
Approach with Error Correction Model.” Prague
Economic Papers 2 (2): 213–226. doi:10.18267/j.
pep.605.
Papapetrou, E., 2001. “Oil Price Shocks, Stock Market,
Economic Activity and Employment in Greece.” Energy
Economics, Volume 23, Issue 5,September 2001, Pages
511–532. 10.1016/S0140-9883(01)00078-0
Pesaran, H. M., and Y. Shin. 1999. “An Autoregressive Distributed
Lag Modeling Approach to Cointegration Analysis.” In In
Econometrics and Economic Theory in the 20th Century: The
Ragnar Frisch Centennial Symposium, edited by S. Strom.
Cambridge, UK: Cambridge University Press; 371-413.
Pesaran, M. H., R. G. Pierse, and M. S. Kumar. 1989.
“Econometric Analysis of Aggregation in the Context of
Linear Prediction Models.” Econometrica 57 (4): 861–888.
doi:10.2307/1913775.
SAMA (2019). Saudi Monetary Authority. Yearly Statistics:
Annual Statistics. Saudi Arabia. http://www.sama.gov.sa/
en-US/Pages/default.aspx
Saudi Vision 2030. https://vision2030.gov.sa/en
Schneider, D. (2011). The Labor Share: A Review of Theory
and Evidence. SFB 649 Discussion Paper, No. 2011-069
Shin, P. H., and R. Smith. 2001. “Bound Testing Approaches
to the Analysis of Level Relationships.” Journal of Applied
Econometrics.16(3) 289–326.
Shittu, O. I., R. A. Yemitan, and O. S. Yaya. 2012. “On
Autoregressive Distributed Lag, Co-Integration and Error
Correction Model.” Australian Journal of Business and
Management Research 2 (08): 56–62.
SLMR. (2016). Saudi Arabia Labor Market Report 2016. Third
edition.
SV. (2030). Saudi Vision 2030. https://vision2030.gov.sa/en .
UN. (2006). United Nations, Economic and Social Council,
Secretary General Report.
Uri, N. D. 1996. “Changing Crude Oil Price Effects on US
Agricultural Employment.” Energy Economics 18 (3):
185–202. doi:10.1016/0140-9883(96)00018-7.