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Exporting Labor or Goods? Long-Term Implications for The Palestinian Economy

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  • Claus Astrup

    () (World Bank)

  • Sébastien Dessus

Abstract

The restricted access of the Israeli labor market to Palestinian workers is a major negative shock for the Palestinian economy, and naturally raises the questions of whether an alternative strategy to exporting labor is feasible and presents at least similar growth opportunities. In this paper, we develop 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 in Israel tends to reduce the capacity of the Palestinian industry to export goods. Second, that even under optimistic assumptions on the export-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 large per capita income losses. Third, 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. Fourth, that external assistance is likely to have then a larger developmental impact, than in the case of a re-opening of the Israeli labor market to Palestinian workers.

Suggested Citation

  • Claus Astrup & Sébastien Dessus, 2001. "Exporting Labor or Goods? Long-Term Implications for The Palestinian Economy," Working Papers 0131, Economic Research Forum, revised 10 2001.
  • Handle: RePEc:erg:wpaper:0131
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    References listed on IDEAS

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    1. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-380, November.
    2. Francisco Rodriguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    3. World Bank, 2001. "Poverty in the West Bank and Gaza," World Bank Other Operational Studies 14357, The World Bank.
    4. Dutz, Mark & Hayri, Aydin, 1999. "Does More Intense Competition Lead to Higher Growth?," CEPR Discussion Papers 2249, C.E.P.R. Discussion Papers.
    5. Sébastien Dessus & Kiichiro Fukasaku & Raed Safadi, 2001. "Multilateral Tariff Liberalisation and the Developing Countries," OECD Development Centre Policy Briefs 18, OECD Publishing.
    6. McCormick, Barry & Wahba, Jackline, 2000. "Overseas Employment and Remittances to a Dual Economy," Economic Journal, Royal Economic Society, vol. 110(463), pages 509-534, April.
    7. Hoekman, Bernard & Kee, Hiau Looi & Olarreaga, Marcelo, 2001. "Mark-ups, Entry Regulation and Trade: Does Country Size Matter?," CEPR Discussion Papers 2853, C.E.P.R. Discussion Papers.
    8. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
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