The labour market impact of mobility restrictions: Evidence from the West Bank∗
By Dr Sami - April 11, 2023
Using data on Israeli closures inside the West Bank, we provide new evidence on the labour market effects of conflict-induced restrictions to mobility. To identify the effects we exploit the fact that the placement of physical barriers by Israel was exogenous to local labour market conditions and use a measure of conflict intensity to control for the likely spurious correlation between local unrest, labour market conditions and barriers’ placement. We find that these barriers to mobility have a significant negative effect on employment, wages and days worked per month. On the other hand the barriers had a positive impact on the number of hours per working day. These effects are driven mainly by checkpoints and only a tiny portion of the effects is due to direct restrictions on workers’ mobility. Despite being an under-estimation of the actual effects, the overall costs of the barriers on the West Bank labour market are substantial: in 2007 for example these costs amounted to 6% of GDP. Most of these costs are due to lower wages, thus suggesting that the labour markets have adjusted to the restrictions more through prices than quantities.