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The effects of labor supply shocks on labor market outcomes: Evidence from the Israeli-Palestinian conflict

  • Mansour, Hani

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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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 6 (December)
Pages: 930-939

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Handle: RePEc:eee:labeco:v:17:y:2010:i:6:p:930-939
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Joshua D. Angrist, 1995. "Short-Run Demand for Palestinian Labor," Working papers 95-16, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. David A. Jaeger & M. Daniele Paserman, 2008. "The Cycle of Violence? An Empirical Analysis of Fatalities in the Palestinian-Israeli Conflict," American Economic Review, American Economic Association, vol. 98(4), pages 1591-1604, September.
  3. 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.
  4. 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.
  5. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2007. "Bootstrap-Based Improvements for Inference with Clustered Errors," NBER Technical Working Papers 0344, National Bureau of Economic Research, Inc.
  6. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," NBER Working Papers 3069, National Bureau of Economic Research, Inc.
  7. 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.
  8. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  9. 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.
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