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Exporting Goods or Exporting Labor?: Long-term Implications for the Palestinian Economy

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  • Astrup Claus

    (The World Bank)

  • Dessus Sebastien

    (The World Bank)

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    Abstract

    During the past four and a half years, the number of Palestinian workers in the Israeli labor market how significantly contracted primarily as a result of restrictions on the movement of Palestinian labor imposed by the Government of Israel. The restricted access of Palestinian workers to the Israeli labor market is a major negative shock for the Palestinian economy, and naturally raises the question of whether an alternative strategy to exporting labor is feasible and presents at least similar income opportunities. This article develops a dynamic general equilibrium model to assess the impact of restricted access to the Israeli labor market on the Palestinian export performance and, in turn, on GDP growth. The results suggest first that exporting large flows of Palestinian workers to Israel tends to reduce the capacity of the Palestinian industry to export goods. Secondly, that— even under optimistic assumptions on the trade-led growth potential of the Palestinian economy—the induced depreciation of the real exchange rate after the closure will not have sufficient growth effects to avoid income losses incurred with the closure of the Israeli labor market. Thirdly, that the adoption of appropriate trade and fiscal policies in this context could significantly magnify the potential growth impact of a real exchange rate depreciation.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Review of Middle East Economics and Finance.

    Volume (Year): 3 (2005)
    Issue (Month): 1 (April)
    Pages: 38-60

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    Handle: RePEc:bpj:rmeecf:v:3:y:2005:i:1:n:3

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/rmeef

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    Cited by:
    1. Flaig, Dorothee & Siddig, Khalid & Grethe, Harald & Luckmann, Jonas & McDonald, Scott, 2013. "Relaxing Israeli restrictions on Palestinian labour: Who benefits?," Economic Modelling, Elsevier, vol. 31(C), pages 143-150.
    2. World Bank, 2007. "West Bank and Gaza - Investment Climate Assessment : Unlocking the Potential of the Private Sector," World Bank Other Operational Studies 7792, The World Bank.
    3. Etkes Haggay, 2012. "The Impact of Employment in Israel on the Palestinian Labor Force," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 18(2), pages 1-36, August.
    4. Etkes, Haggay, 2011. "The impact of employment in Israel on the Palestinian labor force (2005–08)," MPRA Paper 34681, University Library of Munich, Germany.

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