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The price of wealth: business and state in labor remittance and oil economies

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  • Chaudhry, Kiren Aziz

Abstract

This article contrasts the effects of state-controlled oil revenues and privately controlled labor remittances on institutional development, state capacity, and businessgovernment relations in Saudi Arabia and the Yemen Arab Republic. These two countries represent extreme cases of dependence on external capital in deeply divided societies presided over by fragile, emerging bureaucracies. By tracing the two cases through a pattern of economic boom (1973-83) and recession (1983-87), the study demonstrates that the type, volume, and control of capital inflows decisively influence the relative development of the bureaucracy's extractive, distributive, and regulatory capacities and affect the ability of the state to respond to economic crisis. In both cases, external capital inflows precipitated the decline of extractive institutions. However, oil revenues and labor remittances had divergent effects on businessgovernment relations, and this circumscribed the state's ability to implement austerity programs during the recession. During the crisis, the Saudi government's efforts to cut subsidies to the private sector and to implement extractive policies were blocked by the state-sponsored merchant class. In contrast, the Yemeni government instituted a thoroughgoing austerity package that targeted the independent merchant class. In both cases, external capital inflows did not augment the efficacy of those that controlled them. These paradoxical outcomes are explained by tracing the different effects of oil revenues and labor remittances on the distribution of economic opportunity in the public and private sectors and the resulting effects on the regional, tribal, and sectarian composition of the bureaucracy and the commercial class.

Suggested Citation

  • Chaudhry, Kiren Aziz, 1989. "The price of wealth: business and state in labor remittance and oil economies," International Organization, Cambridge University Press, vol. 43(1), pages 101-145, January.
  • Handle: RePEc:cup:intorg:v:43:y:1989:i:01:p:101-145_00
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    Cited by:

    1. Abdelkader Sid Ahmed, 2000. "Le paradigme rentier en question : l'expérience des pays arabes producteurs de brut. Analyse et éléments de stratégie," Revue Tiers Monde, Programme National Persée, vol. 41(163), pages 501-521.
    2. Fubing Su & Guoxue Wei & Ran Tao, 2016. "China and Natural Resource Curse in Developing Countries: Empirical Evidence from a Cross-country Study," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(1), pages 18-40, January.
    3. Knack, Stephen, 2009. "Sovereign rents and quality of tax policy and administration," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 359-371, September.
    4. Ambrosius, Christian, 2019. "Government reactions to private substitutes for public goods: Remittances and the crowding-out of public finance," Journal of Comparative Economics, Elsevier, vol. 47(2), pages 396-415.
    5. Escriba-Folch, Abel & Meseguer, Covadonga & Wright, Joseph, 2018. "Remittances and protest in dictatorships," LSE Research Online Documents on Economics 89058, London School of Economics and Political Science, LSE Library.
    6. Moore, Mick, 2014. "Revenue Reform and Statebuilding in Anglophone Africa," World Development, Elsevier, vol. 60(C), pages 99-112.
    7. Abdelkader Sid Ahmed, 1996. "Le cadre de la coopération de Barcelone : implications pour les économies arabes du Moyen-Orient," Revue Tiers Monde, Programme National Persée, vol. 37(148), pages 919-939.
    8. Esra Çeviker Gürakar & Emin Köksal, 2016. "Institutional evolution and economic development in Iran and Turkey," Middle East Development Journal, Taylor & Francis Journals, vol. 8(1), pages 32-64, January.
    9. Elbadawi, Ibrahim & de Rezende Rocha, Robert, 1992. "Determinants of expatriate workers'remittances in North Africa and Europe," Policy Research Working Paper Series 1038, The World Bank.
    10. Michael Batu, 2019. "Can remittances buy peace?," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 27(4), pages 891-913, October.
    11. Matthew Costello, 2018. "Oil and Gas Rents and Civilian Violence in the Middle East and North Africa, 1990–2004: A Resource Curse, or Rentier Peace?," Social Sciences, MDPI, vol. 7(3), pages 1-20, March.
    12. Cingolani L, 2013. "The State of State Capacity : a review of concepts, evidence and measures," MERIT Working Papers 2013-053, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    13. Fayq Al Akayleh, 2017. "Accession to World Trade Organization and its Implications for Trade Diversification and Economic Activity: Evidence from Saudi Arabia," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 3(12), pages 332-345, 12-2017.
    14. James C. A. Redman, 2020. "An Overview of Innovation in the Arab Gulf States: From Origins and Five‐Year Plans to New Cities and Indices," Social Science Quarterly, Southwestern Social Science Association, vol. 101(7), pages 2485-2506, December.
    15. Marques, Israel & Remington, Thomas & Bazavliuk, Vladimir, 2020. "Encouraging skill development: Evidence from public-private partnerships in education in Russia’s regions," European Journal of Political Economy, Elsevier, vol. 63(C).

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