The impact of labor mobility on unemployment: a comparison between Jordan and Tunisia

Jordan and Tunisia are two non-oil exporting MENA countries characterized by high unemployment rates and significant migrant populations. A comparative analysis of the impact of international mobility in the two countries allows us to shed light on the mechanisms through which emigration affects labor market outcomes and reciprocally. We develop a dynamic general equilibrium framework for each economy, with a full-fledged modeling of migration, labor market and education issues. The results show that the global crisis worsened the unemployment situation by increasing labor supply in both countries. This phenomenon was amplified by a significant decrease in labor demand in the Tunisian case. Developing Mode 4 type of exports improves the labor market situation, mainly for high skilled workers. As a consequence, migration and brain-drain would be reduced. Furthermore, an increase in foreign wages has higher benefits in Jordan despite a higher induced migration increase in Tunisia. When the rise is limited to high-skilled migrants’ wages, low and medium skilled workers are positively affected in Tunisia and negatively in Jordan. Finally, Mode 4 and high skilled wages increases have clear positive effects on transition rates to superior education, while the other shocks have variable effects, depending on labor market structural parameters in the two countries. ∗LEDA-DIAL Université Paris-Dauphine. Address: DIAL, 4 rue d’Enghien 75010 Paris, France, e-mail: [email protected] †Paris1-Pantheon-Sorbonne University, DIAL and Economic Research Forum. E-mail: [email protected]. We gratefully acknowledge the financial support provided by the Economic Research Forum. We would also like to thank Denise Konan and Chahir Zaki for fruitful discussions. This paper has also benefited from comments of Björn Nilsson, participants in the ERF Workshop on "‘Capital and Labor Mobility within the ERF Region"’ and participants in the DIAL-Dauphine research seminar. Finally, we would like to thank all the policy makers met at the different stages of the research project.