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The Effects of Labor Supply Shocks on Labor Market Outcomes: Evidence from the Israeli-Palestinian Conflict

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  • Hani Mansour

Abstract

Since September 2000, as a result of mobility restrictions, the supply of Palestinian workers competing for local jobs in the West Bank has increased by about fifty percent. This paper takes advantage of this unique natural experiment to study the effects of labor supply shocks on labor market outcomes. Using quarterly information on wages and employment in each city in the West Bank, the paper analyzes the short-run adjustment of labor markets to a large inflow of workers separately from the effects of political instability. The results suggest that low-skilled wages are adversely affected by an increase in the supply of low- and high-skilled workers, while high- skilled wages are only weakly negatively related to an increase in their own supply. This is consistent with a scenario in which high skilled workers compete for low skilled jobs, pushing the low skilled into unemployment. This latter hypothesis is confirmed by analyzing the effects of changes in labor supply on unemployment.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.357345.de/dp1014.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1014.

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Length: 35 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp1014

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Keywords: Immigration; Labor Supply Shocks; Border Controls;

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  1. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  2. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  3. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," NBER Working Papers 3069, National Bureau of Economic Research, Inc.
  4. David A. Jaeger & M. Daniele Paserman, 2005. "The Cycle of Violence? An Empirical Analysis of Fatalities in the Palestinian-Israeli Conflict," Working Papers 22, Department of Economics, College of William and Mary.
  5. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
  6. Stephen G. Donald & Kevin Lang, 2007. "Inference with Difference-in-Differences and Other Panel Data," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 221-233, May.
  7. Angrist, Joshua D, 1996. "Short-Run Demand for Palestinian Labor," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 425-53, July.
  8. Sarit Cohen-Goldner & M. Daniele Paserman, 2006. "Mass migration to Israel and natives' employment transitions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 59(4), pages 630-652, July.
  9. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
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Cited by:
  1. Mansour, Hani & Rees, Daniel I., 2012. "Armed conflict and birth weight: Evidence from the al-Aqsa Intifada," Journal of Development Economics, Elsevier, vol. 99(1), pages 190-199.
  2. Etkes, Haggay, 2011. "The impact of employment in Israel on the Palestinian labor force (2005–08)," MPRA Paper 34681, University Library of Munich, Germany.
  3. Hani Mansour & Daniel I. Rees, 2011. "The Effect of Prenatal Stress on Birth Weight: Evidence from the al-Aqsa Intifada," Discussion Papers of DIW Berlin 1108, DIW Berlin, German Institute for Economic Research.
  4. Aydemir, Abdurrahman & Kirdar, Murat G., 2011. "Quasi-experimental impact estimates of immigrant labor supply shocks: the role of treatment and comparison group matching and relative skill composition," MPRA Paper 35423, University Library of Munich, Germany.
  5. Cali, Massimiliano & Miaari, Sami H., 2013. "The labor market impact of mobility restrictions : evidence from the West Bank," Policy Research Working Paper Series 6457, The World Bank.
  6. Åslund, Olof & Engdahl, Mattias, 2013. "Open borders, transport links and local labor markets," Working Paper Series 2013:11, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  7. Caruso, Raul & Gavrilova, Evelina, 2011. "Youth Unemployment, Terrorism and Political Violence, Evidence from the Israeli/Palestinian Conflict," NEPS Working Papers 6/2011, Network of European Peace Scientists.
  8. 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.
  9. Maren M. Michaelsen, 2012. "Mental Health and Labour Supply – Evidence from Mexico‘s Ongoing Violent Conflicts," Ruhr Economic Papers 0378, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  10. 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.

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