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The labor market costs of conflict: closures, foreign workers, and Palestinian employment and earnings

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  • Sami Miaari

    ()

  • Robert Sauer

    ()

Abstract

In this paper, we measure the implications of the Israeli-Palestinian conflict for Palestinian employment and earnings. We quantify the conflict by the frequency of temporary closures of the West Bank and Gaza Strip and the number of overseas foreign workers in the Israeli labor market. Data on Palestinian employment and earnings are taken from the Palestinian Labor Force Survey (PLFS) of the Palestinian Central Bureau of Statistics. The PLFS micro level panel data are combined with quarterly time series data on the number of foreign workers in Israel, the number of foreign worker permits issued by the Israeli government, and the frequency of temporary closures of the West Bank and Gaza Strip, between the years 1999 and 2004. Fixed-effects estimates which exploit the number of foreign worker permits issued by the Israeli government as an instrument for the number of foreign workers, yield large and statistically significant negative effects of the Israeli-Palestinian conflict on Palestinian employment rates in Israel and mean monthly earnings, regardless of work location (Israel or West Bank and Gaza Strip). Closures also significantly reduce Palestinian employment rates in Israel and mean monthly earnings. The impact of foreign workers is relatively stronger than the impact of closures because foreign workers are long-run substitutes for Palestinians in the Israeli labor market while closures represent only a transitory, short-run restriction on Palestinian labor supply. However, the impact of foreign workers also reflects a permanent effect of closures.

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Bibliographic Info

Article provided by Springer in its journal Review of Economics of the Household.

Volume (Year): 9 (2011)
Issue (Month): 1 (March)
Pages: 129-148

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Handle: RePEc:kap:reveho:v:9:y:2011:i:1:p:129-148

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Web page: http://www.springerlink.com/link.asp?id=109451

Related research

Keywords: Conflict; Immigration; Foreign workers; Closures; Employment; Earnings; Instrumental variables; J21; J31; J40; J61; F22; C23;

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References

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Citations

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Cited by:
  1. Sami Miaari & Asaf Zussman & Noam Zussman, 2012. "Employment Restrictions and Political Violence in the Israeli-Palestinian Conflict," Economics of Security Working Paper Series 59, DIW Berlin, German Institute for Economic Research.
  2. 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.
  3. El-Attar, Mayssun, 2009. "Could Education Promote the Israeli-Palestinian Peace Process?," IZA Discussion Papers 4447, Institute for the Study of Labor (IZA).
  4. Sami Miaari & Robert Sauer, 2011. "The labor market costs of conflict: closures, foreign workers, and Palestinian employment and earnings," Review of Economics of the Household, Springer, vol. 9(1), pages 129-148, March.
  5. Massimiliano Cali & Sami Miaari, 2013. "The labour market impact of mobility restrictions: Evidence from the West Bank," ERSA conference papers ersa13p99, European Regional Science Association.
  6. Di Maio, Michele & Nandi, Tushar K., 2013. "The effect of the Israeli–Palestinian conflict on child labor and school attendance in the West Bank," Journal of Development Economics, Elsevier, vol. 100(1), pages 107-116.
  7. Caruso Raul & Gavrilova Evelina, 2012. "Youth Unemployment, Terrorism and Political Violence, Evidence from the Israeli/Palestinian Conflict," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 18(2), pages 1-37, August.
  8. Geesche M. Merkle & Rico Ihle & Yael Kachel & Ulf Liebe, 2013. "Economic cooperation despite of political conflict: Israeli traders’ perception of Israeli-Palestinian food trade," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 151, Courant Research Centre PEG.
  9. Ted Aranki & Yousef Daoud, 2010. "Competition, substitution, or discretion: an analysis of Palestinian and foreign guest workers in the Israeli labor market," Journal of Population Economics, Springer, vol. 23(4), pages 1275-1300, September.
  10. Etkes, Haggay, 2011. "The impact of employment in Israel on the Palestinian labor force (2005–08)," MPRA Paper 34681, University Library of Munich, Germany.
  11. Maren M. Michaelsen, 2012. "Mental Health and Labour Supply: Evidence from Mexico’s Ongoing Violent Conflicts," HiCN Working Papers 117, Households in Conflict Network.
  12. Ihle, Rico & Rubin, Ofir D., 2013. "Consequences of unintended food policies: Food price dynamics subject to the Israeli–Palestinian conflict," Food Policy, Elsevier, vol. 42(C), pages 96-105.
  13. Siddig, Khalid H.A. & Flaig, Dorothee & Luckmann, Jonas & Grethe, Harald, 2011. "A 2004 Social Accounting Matrix for Israel: Documentation of an Economy-Wide Database with a Focus on Agriculture, the Labour Market, and Income Distribution," Working Papers 110156, Universitaet Hohenheim, Institute of Agricultural Policy and Agricultural Markets.

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