The Palestinian Economy. Theoretical and Practical Challenges

Proceedings “The Palestinian Economy: Theoretical and Practical Challenges” 329
labour while all other variables maintain their sign and significance. The magnitude of the
effect of closures is slightly reduced but still highly significant. In Column 2, we estimate
the same specification as in Column 1 but we also include the households from Jerusalem
Est in our estimation sample. 10 As expected, both the coefficient of the number of closure
days and the interaction between distance and closures increases their significance.
Finally, in regression (3) we estimate our preferred specification including a number of
additional household control variables. These are the number of siblings 10-14 and 15-17
years old in the household, the ratio of female children in the household, the household
size and the place of living of the household (rural, urban, or refugee camp). 11 The results
confirm also in this case the positive and significant effect of the number of closure days
on child labour. In addition, this specification shows that, even if the coefficient is only
marginally significant, the number of closure days decreases the probability of school
attendance. Yet the sign of the interaction term indicates that effect is reduced for
household living further from the border.
We also perform a series of other robustness checks (results not reported). 12 To take into
account the observation in Moulton (1990), we considered alternative ways of correcting
standard errors. While in our main estimation we used robust errors, as robustness checks
we clustered errors around the district market wage, district unemployment and
household income. Results do not change. We also considered alternative econometric
models. First, we consider the case in which work and school attendance decision are
assumed to be independent. To this end we run two separated probit regressions -one for
child labour and one for school attendance, in which we also included household fixed
effects. This is a particularly important robustness check, since the inclusion of time,
district and household fixed effects rule out a number of possible omitted variable issues.
While point estimates are slightly different from the ones obtained with our model – since
the probit model does not account for the trade-off between the two outcomes results
confirm the significant effect of closure days in increasing child labour. Results do not
change even including school attendance (child labour) as control variables in the child
labour (school attendance) probit regression. Finally, we also estimated a tobit model for
10 East Jerusalem was annexed by Israel in 1967. Despite the annexation, East Jerusalem is considered an
important commercial and cultural center that serves Palestinians living in the rest of the West Bank. The
Palestinians living in that area have a rather peculiar status with respect to the ones in other districts in West
Bank. While Palestinians living in East Jerusalem do not carry an Israeli nationality, they do not need a work
permit to commute to Israel.
11 Note that these variables are all likely to be exogenous to child’s status.
12 Detailed results are available upon request