The Palestinian Economy. Theoretical and Practical Challenges

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Di Maio – Nandi
West Bank, but it is mainly led by the military consideration by the Israeli Army. If this is
the case, one may expect the number of closure days to respond to an increase in the
violence between the two opponents. This implies that, for our estimation strategy to be
valid, we also need to exclude the possible endogeneity between the number of closure
days and the rate of school attendance. The reason is – as pointed out by Rodriguez and
Sanchez (2009) – that in a context of conflict being a drop out may increase rebellion and
violence in the child. Similarly, it is very likely that if being out-of school is positively
correlated with the child involved in the confrontation with the Israeli Army, it would
also influence the number of closure days. To check the existence of this mechanism (the
number of closure days being a response to the increase in the violence by children who
are not attending school), we compute the correlation between the rate of school
attendance and the number of closure days, which is our proxy of the intensity of the
conflict. The results (not reported) show that correlation between the number of closure
days and the rate of school non-attendance is small and statistically insignificant. Based
on this evidence, we thus exclude the possibility of reverse causality between the number
of closure days and school attendance.
Table 1: Labour market conditions in West Bank and the number of closure days
Number of closure days (1) (2) (3) (4) (5) (6) (7)
average wage in WB (previous quarter) 1.60 1.67 2.08 1.67
(1.16) (1.23) (1.33)
(1.47
)
unemployment rate in WB (previous quarter) 0.26 0.41 0.57 0.41
(1.62) (1.69) (1.71)
(1.55
)
average unskilled wage in WB (previous quarter) -0.63 -0.92 -0.91
(0.85) (0.90)
(0.93
)
no.closure days (previous quarter) -0.36 -0.33
(0.21) (0.22
)
F-test 0.028 0.026 0.006 0.003 0.074 0.022
0.01
6
R2 0.52 0.49 0.51 0.56 0.52 0.55 0.61
# observations 24 24 24 24 24 24 24
Note: In all specifications the dependent variable is the quarterly number of effective closures
days. Effective closure days are comprehensive closures net of Saturdays, half the number of
Fridays and Jewish and Muslim holidays. OLS regression, robust standard errors in parenthesis.
All regressions include a constant and year fixed effect.