Ethnic Conflict and Job Separations

We study the effect of the second Intifada, a violent conflict between Israel and its Palestinian neighbors which erupted in September 2000, and the ensuing riots of Arab citizens of Israel, on labor market outcomes of Arabs relative to those of Jewish Israelis. The analysis relies on a large matched employer-employee dataset, focusing on firms that in the pre-Intifada period hired both Arabs and Jews. Our analysis demonstrates that until September 2000 Arab workers had a lower rate of job separation than their Jewish peers and that this differential was significantly reduced after the outbreak of the Intifada. We argue that the most likely explanation for this pattern is increased anti-Arab discrimination among Jews.