The economic impact of inbound and outbound labor migration: the case of Jordan (1970-2006)

Purpose – The purpose of this paper is to examine the impact of inbound and outbound labor migration on the Jordanian economy. Design/methodology/approach – Using a qualitative analysis subsidized by two econometric models, foreign labor and their remittances and the Jordanian labor abroad and their remittances are examined for their impact on main macroeconomic indicators. Findings – The characteristics of foreign labor and the Jordanian labor abroad, in terms of skills and qualifications are completely different. Productivity of a local worker is found to be higher than of a foreign worker. Thus, replacement of foreign labor is highly recommended but difficult due to “shame culture”. Foreign labor deepens unemployment and negatively affects economic growth through their effect on capital account, total reserve, and investment. Outbound labor migration reduced unemployment and speeds economic growth. They induce investment and increase reserves, but they also put an upward pressure on overall price and induce imported inflation. Research limitations/implications – Best utilization of these remittances can be achieved if they are mainly used for production rather than for consumption purposes. Remittances of foreign labor must be controlled to reduce leakages of the foreign currencies. Scheduled decrease in demand for foreign labor in Jordan is a must. But it must be accompanied by getting rid of the non-reasonable “shame culture”, encouraging entrepreneurship, and enhancing quality of jobs. Originality/value – The paper provides decision and policy makers with informative analysis of the net impact inbound and outbound labor migration. This analysis helps in drafting labor policies and regulations. The households sector is a key player for the success of these policies.