POLITICAL INSTABILITY, CLOSURES AND LABOR REALLOCATION IN THE WEST BANK AND GAZA STRIP

This paper investigates the labor market responses to conflict and labor market disruptions in the West Bank and Gaza Strip. From 1987 to 1995 the West Bank and Gaza Strip witnessed an increase in instability as political conflict disrupted the economy. This paper finds that disruptions later in the period are associated with increased reallocation between sectors and lower unemployment, compared to equivalent shocks earlier in the period. Additionally, the effects of these shocks are primarily felt by younger workers. The findings are consistent with a decrease in human capital investment during this time, but several alternative explanations are also explored.