The Contribution of Local and Foreign Labor to Total Factor Productivity in Saudi Arabia

Abstract

This study employs time series to find total factor productivity (TFP) and the contribution of local workers, foreign workers, GDP, trade openness, oil revenue, capital stock, and foreign direct investment (FDI) to TFP. First, this study used accounting growth formula to calculate the time series of TFP growth. Secondly, it used VEC Model to examine the impact of local workers, foreign workers, oil revenue, GDP, capital stock, trade openness and foreign direct investment (FDI) on the TFP. The local workers and foreign workers have a positive impact on TFP in the long run and short run. But, the relationship between local workers and foreign workers is negative in a long run. This relationship means that foreign workers are substitutes for local workers.