TY - JOUR
T1 - From Economic Integration to Near Elimination
T2 - The Economic Consequences of Isolation
AU - Adnan, Wifag
N1 - Funding Information:
I am greatly indebted to Cecilia Rouse, Orley Ashenfelter, and Alex Mas, for providing me with outstanding guidance, inspiration and support. Further, I thank John Ham, Suresh Naidu, Nancy Qian, Alan Krueger, Christian Haefke, and Francois Bourguignon for providing me with substantive and insightful comments. I am also grateful to seminar participants at the SOLE conference, IZA, the IR section at Princeton University and NYUAD for providing invaluable comments and suggestions. Further, I would like to thank Princeton University’s Industrial Relations (IR) section and the Graduate School for their guidance and support throughout this entire process. I am also grateful to the Palestinian Central Bureau of Statistics (PCBS) for providing me with the necessary data to conduct this research. All mistakes are my own.
Publisher Copyright:
© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
PY - 2022
Y1 - 2022
N2 - This paper captures the labor market consequences of the Gaza Blockade (2007–), a politically motivated and unanticipated event that provides a rare opportunity for a natural experiment. I am aided by the fact that the West Bank is a natural comparison group for examining the Gaza Blockade. Using a difference-in-difference framework, I find that, relative to domestic workers in the West Bank, those in Gaza experienced an additional 11% point increase in the unemployment rate and an additional 13–20% reduction in real wages. The long-term effect (3 years later), on real wages was at least 1.5 times larger. Rising wage inequality was another consequence of the Blockade, which manifested itself in an upsurge in industry wage differentials and to a lesser extent, the skill premium. This paper also discusses the impact of the crisis on the sectoral composition of the Gazan economy, particularly as a result of the severe contraction of non-service industries in the private sector. While the Gaza Blockade constitutes an extreme case of a massive economic shock and a radical departure from the close economic integration experienced in earlier decades, the results of this study can nevertheless serve to shed light on how other open economies are likely to respond to the increasingly common imposition of restrictions on trade and factor mobility such as economic sanctions, visa restrictions, and trade wars. The effects of such barriers to trade and labor mobility are particularly dire in the absence of labor reforms designed to mitigate their adverse effects. KEYWORDS: Middle East; conflict; economic development; labour; wages; trade.
AB - This paper captures the labor market consequences of the Gaza Blockade (2007–), a politically motivated and unanticipated event that provides a rare opportunity for a natural experiment. I am aided by the fact that the West Bank is a natural comparison group for examining the Gaza Blockade. Using a difference-in-difference framework, I find that, relative to domestic workers in the West Bank, those in Gaza experienced an additional 11% point increase in the unemployment rate and an additional 13–20% reduction in real wages. The long-term effect (3 years later), on real wages was at least 1.5 times larger. Rising wage inequality was another consequence of the Blockade, which manifested itself in an upsurge in industry wage differentials and to a lesser extent, the skill premium. This paper also discusses the impact of the crisis on the sectoral composition of the Gazan economy, particularly as a result of the severe contraction of non-service industries in the private sector. While the Gaza Blockade constitutes an extreme case of a massive economic shock and a radical departure from the close economic integration experienced in earlier decades, the results of this study can nevertheless serve to shed light on how other open economies are likely to respond to the increasingly common imposition of restrictions on trade and factor mobility such as economic sanctions, visa restrictions, and trade wars. The effects of such barriers to trade and labor mobility are particularly dire in the absence of labor reforms designed to mitigate their adverse effects. KEYWORDS: Middle East; conflict; economic development; labour; wages; trade.
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U2 - 10.1080/00220388.2022.2029416
DO - 10.1080/00220388.2022.2029416
M3 - Article
AN - SCOPUS:85126221380
SN - 0022-0388
VL - 58
SP - 1160
EP - 1180
JO - Journal of Development Studies
JF - Journal of Development Studies
IS - 6
ER -