The Effects of the Gulf War on Migration and Remittances

A key feature of the regional economy in the Middle East and North Africa is the flow of migrants from resource poor, but labor abundant countries to the resource rich nations of the Persian Gulf. These workers send remittances back home in large quantities, in some cases exceeding the value of home country exports. The 1990-1991 Gulf War disrupted this dynamic as hundreds of thousands of migrants returned to their native countries, leading to significant decreases in remittance flows to these nations. Using a panel VAR analysis, I show that remittance inflows to the labor exporting countries in the region have a significant yet temporary impact on GDP growth. The major reductions in remittances during the Gulf War were at least partially responsible for the economic downturns suffered by many nations in the region during this period. This result is relevant today as the global financial crisis of 2008 has led to a similar downturn in remittance flows from the Gulf nations