This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.This paper tests the association between the Gulf Cooperation Council (GCC) countries' financial and remittance outflows and regional growth in the Middle East. The findings, based on 35-year panel data, indicate that growth rates of real GDP, private consumption and private investment in regional countries are strongly associated with remittance outflows from and the accumulation of financial surpluses in the GCC. Unlike in other developing and emerging market countries, growth in regional countries is not influenced by growth in the North, and is not export led. Linkages with the GCC could help sustain output growth in the regional countries in the face of the global economic slowdown and oil price shocks and could provide diversification gains to international capital seeking markets uncorrelated with Northern and emerging market countries.
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The effect of nominal tariff cuts on industry wage differentials has been the subject of a number of recent empirical studies. In this paper we investigate the latter relationship with respect to the South African trade reform experience using labor force data for the period from 1995 to 2004. Our study extends on the existing literature in two respects: firstly, we control for the potential effect of labor market institutions, such as collective bargaining power, in assessing the relationship between tariffs and industry wages. Secondly, we account for general equilibrium effects by controlling for the impact of changes in effective tariffs rates. We find that on the one hand, only wages in industries with levels of unionization beyond a certain threshold were adversely affected by tariff cuts. This negative effect is exacerbated by the extent of sectoral union power. The reported large magnitudes of the tariff impact on wages is in line with the considerably high markups documented for South Africa. On the other hand we find some evidence suggesting that wages in industries with union power below the threshold were positively affected by the tariff cuts.
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