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Energy-exporting countries were once perceived solely as contributors to the problem of climate change. However, given the anticipated increase in demand for affordable and reliable oil and gas supplies, driven by geopolitical concerns, a growing global population, and an expanding economy, they are now increasingly recognized as key players in addressing the issue. Consequently, the assessment of how their economies fare becomes critical as they endeavor to undergo domestic energy transitions and reduce their economic reliance on oil and gas revenues. In this paper, we introduce international migration in the basic Dutch disease model with a resource windfall. The model predicts that international immigration may help mitigate the decline in the non-energy tradable sector induced by energy windfall. This mitigating impact occurs even when accounting for remittances. Estimating a structural vector autoregression (VAR) model on a panel of the 6 Gulf Cooperation Council (GCC) countries with annual data over the period 1980-2019, we find evidence aligning with our theoretical prediction. Specifically, our empirical results show that a temporary migration inflow of 1 migrant per 1,000 inhabitants leads to a significant increase in manufacturing production by 0.8 percent immediately and 0.5 percent after one year. The cumulative impact remains significant at the 10-year horizon.
