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

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Listed author(s):
  • 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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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
Handle: RePEc:diw:diwwpp:dp1014
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Keywords: Immigration; Labor Supply Shocks; Border Controls;

Other versions of this item:

Find related papers by JEL classification:
  • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
  • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
  • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
  • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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  1. Angrist, Joshua D, 1996. "Short-Run Demand for Palestinian Labor," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 425-453, July.
  2. 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.
  3. David Card, 1990. "The Impact of the Mariel Boatlift on the Miami Labor Market," ILR Review, Cornell University, ILR School, vol. 43(2), pages 245-257, January.
  4. 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.
  5. Sarit Cohen-Goldner & M. Daniele Paserman, 2006. "Mass Migration to Israel and Natives' Employment Transitions," ILR Review, Cornell University, ILR School, vol. 59(4), pages 630-652, July.
  6. 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.
  7. 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.
  8. 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.
  9. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
  10. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
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