The Palestinian Economy. Theoretical and Practical Challenges

Proceedings “The Palestinian Economy: Theoretical and Practical Challenges” 333
Results are reported in Table 7. Column 1 shows that the number of closure days reduces
household income, and that the latter in turn is negatively correlated with child labour.
We also find (Column 2) that the number of closure days increases the number of male
unemployed in the household. In conjunction with the result (Column 3) that the closure
days reduces the probability of the father being employed in Israel, this is convincing
evidence that the closure have drastically modified the conditions of the Palestinian
domestic labour market. Results in the upper panel of the Table show that child labour
indeed increases in response to an increase in the unemployment at the household level
and to a reduction in the probability of the father being employed in Israel induced by the
closures of borders between Israel and the WB. 17 The last column shows that while the
father being self employed is indeed highly correlated with the probability of child labour
(Edmonds 2008), this relationship is not influenced by the number of closure days.
Among all the channels considered, we find that the strongest is the change in the
local labour market condition: a 10 day increase in the number of closure days in a
quarter induces a reduction in the local market wage that increases child labour by 9.6%.
5.2.1. Discussion of the results
Our results show that the number of closures days may affect child’s status through
different channels. But it is also possible that the same channel may impact households
differently. For instance, closures are expected to have a stronger effect on households
having the father employed in Israel since their income suffer a sudden drop due to the
closure of borders. To test the existence of this difference, we first estimate our preferred
specification separately for the households with the father employed in Israel and for the
ones with the father employed in West Bank. Results (not reported) show that for both
samples closures increase child labour but the effect is much larger for households with
the father employed in Israel. 18 Then, to test if the household income channel affects in a
different way the households depending on where (Israel/West Bank) the father works,
we run the second stage in Column 1 in Table 7 separately for the two samples. Results
(not reported) show that effects of closure days on household income is significant only
for the former.
17 Note that the average wage of workers employed in Israel is higher than the domestic wage in West Bank.
18 Note that this larger effect is not due to a selection bias since the average income of households with the
father employed in Israel is higher than the average income of households with the father employed in
West Bank.