Market Access and Development of the ICT Sector in the West Bank

Despite the popular view that, with the advent of digital technologies, the world has becomeflat, geography still plays a key role in the economy. COVID-19 has brought even more awareness of this. This paperstudies the impact of security measures that have reduced the mobility of people and goods on the industrialcomposition of the West Bank economy, and, in particular, on the development of the information and communicationstechnology sector. The paper identifies different channels through which changes in market access due to theintroduction of mobility restrictions can differentially affect industries. A newly designed survey instrument isused to identify and disentangle these mechanisms separately. This novel data set contains information on morethan 500 establishments that are representative of different sectors of the economy, including information andcommunications technology, manufacturing, and retail trade. The analysis finds that the mobility restrictions involved areallocation of resources toward the information and communications technology sector, as the industry wasrelatively less affected by the restrictions. Yet, the key role of the input-output linkages, strong dependence onlocal clients and suppliers, and deep interconnectedness of the information and communications technology sector withother domestic industries severely limit the extent to which the sector can benefit from the reduction in opportunitycost. An industrial strategy focusing on the harmonious development of the entire economy is advised, rather thantargeting a specific industry in isolation from the rest.