The Palestinian Economy. Theoretical and Practical Challenges

Proceedings “The Palestinian Economy: Theoretical and Practical Challenges” 317
know, Rodriguez and Sanchez (2009) is the only paper that analyze the impact of the
exposure to armed conflict on child labour. Using data for Colombia, they show that the
conflict affects child labour by reducing (local) economic activity, life expectancies and
school quality.
The Israeli-Palestinian is one of the longest and politically most relevant conflicts.
Recently researchers have started analysing its impact on different dimensions of the
Palestinian economy and in particular on the labour market. Indeed, the Palestinian labour
market is quite peculiar: domestic unemployment and wage have, for long, strongly
responded to job opportunities and wage dynamics in Israel (Angrist 1996; Kadri and
MacMillen 1998). 3 This is not surprising considering that by the late 1990s – under
conditions of relatively open but controlled borders – more than one-fifth of the
Palestinian labour force was commuting daily to Israel (Ruppert Bulmer 2003). 4 After the
beginning of the Second Intifada, closures of borders (together with a number of other
measures) have been increasingly used to prevent the movement of all Palestinians –
including authorized workers, between the Palestinian Territories and Israel. While
closures are intended to be a security measure taken in the presence of surges, or expected
surges, in the conflict, their effects turned out to be much more pervasive, affecting the
whole Palestinian economy and in particular the labour market (B’Tselem 2007; OCHA
2007; PCBS 2001; United Nations 2002; World Bank 2003). Ruppert Bulmer (2003)
studies of the effect of changes in the Israeli border policy on daily Palestinian labour
flows to Israel, unemployment and wages. The calibrated model predicts that closures
would raise total unemployment in Palestine, increasing domestic employment with
decreasing wages. The latter effect is the result of the downward pressure caused by the
return of workers previously employed in Israel. Aranki (2004) and Miaari and Sauer
(2010) both estimated the effect of closures on the Palestinian labour market using data
from the PCBS Labour Force Survey. Their results suggest that closures increase the
probability of being unemployed and decrease the monthly earnings of Palestinian
workers regardless of their work location (Israel or Palestinian Territories). Al Kafri
(2003) finds that between 2000 and 2001 (i.e. before and after the Second Intifada began)
child labour increased for male while school attendance decreased for female. However,
3 See also Farsakh (2002), Shaban (1993).
4 Until the late 1980s, Palestinians and Israelis could move freely between each other’s territories. Israel
introduced permit requirements in 1991 to control the movements of Palestinian workers. After the 1993 Oslo
Accords permit controls and other mobility restrictions (i.e., temporary border closures) were started to be
strictly enforced