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HB31
.M415
working paper
department
of economics
SHORT-RUN DEMAND FOR PALESTINIAN LABOR
Joshua D. Angrisf
95-16
April 1995
massachusetts
institute of
technology
50 memorial drive
Cambridge, mass. 02139
SHORT-RUN DEMAND FOR PALESTINIAN LABOR
Joshua
D. Angrist
95-16
April 1995
MASSACHUSETTS INSTITUTE
OF TECHNOLOGY
:
AUG 16
1995
LIBRARIES
95-16
SHORT-RUN DEMAND FOR PALESTINIAN LABOR*
by
Joshua D. Angrist
Revised: April 1995
Abstract
Palestinian residents of the
Israel.
Wages
West Bank and Gaza
Strip
have the option of working
who
paid to residents of the territories
are employed in Israel are
generally higher than wages paid in the territories, but the Israel
highly volatile.
wage
Beginning
differentials
in late
by work
in
wage premium
1987 with the Palestinian uprising, changes
is
in
location roughly parallel the pattern of Palestinian
absences from work in Israel. This paper discusses aspects of the demand for
Palestinian labor and explores the possibility that recent changes in relative
work
location are explained
A
workers.
model of the labor markets
estimate elasticities of
changes
in policies
This paper
by movements along an
demand and
in the
to evaluate the possible
governing Palestinian access to the
supported by the Falk Institute through a grant from the
Ministry of Labor and Social Affairs. Preliminary
from the Ford Foundation. Special thanks
at the Israel Central
Ron
program
in
Bank of
Israel
The author bears
is
used to
economic impact of
human
market.
resources and has been
Manpower Planning Authority
work and data
collection
Hanoch, seminar participants
at
Hebrew
in the Israeli
was supported by
Zvi Eisenbach, Zeev Krischer, and other
Bureau of Statistics for providing the Territories micro
Eisenstadt, Giora
Strip
Israeli labor
Arbeli, and Natalie Aflalo provided expert research assistance.
Maggie
the
to
demand curve for migrant
West Bank and Gaza
part of the Falk Institute research
is
Israeli
wages by
data.
Thanks
also
staff
a grant
members
Samer Haj Yehia,
go
to Eli
Berman,
University, Tel Aviv University,
and Princeton University, and to the referees and editor for helpful comments.
sole responsibility for the content of this paper.
INTRODUCTION
I.
Since October 1970, changes
in access to the Israeli labor
changes and policy innovations
An
territories.
in
the
important recent example
market have constituted the major
economic relationship between
is
restrict mobility
Gulf War, the
the enforcement of laws against employing Palestinian workers
Service. Registration for
Post, 1988, Jerusalem
Recent changes
employment has
also
who
in Palestinian
in Israel in the
Israel
1
I
also
become more
the
up
Jerusalem
difficult (The
wage premium paid
new
Israeli stabilization,
high, reaching
crisis that
(see, e.g.,
Kleiman
wage
distribution
— 1990. One
of the most
document a number of significant changes
the virtual elimination of the
Following
climbed to a
On
are not registered with the Israeli
employment patterns have been widely noted
mid-1980s, a period of inflation and economic
in construction.
territories.
Israeli authorities stepped
of workers from the West Bank and the Gaza Strip over the period 1981
is
hand, strikes and
Media and Communications Center, 1991).
1992). In Angrist (1992),
important changes
On one
and employment opportunities for workers from the
other, beginning in 1988, and especially since the 1991
Employment
and the occupied
Israel
the Palestinian uprising, which has periodically restricted
access to the Israeli labor market because of actions taken on both sides.
curfews
field for
in the
to Palestinians for
working
included a severe contraction
however, the daily wage premium paid for work
in
40 percent by 1989.
Since December 1987, changes in the Israel wage premium have roughly paralleled the pattern
of absences from work by Palestinians employed
wage
increases
may
reflect
movements along a short-run
sudden withdrawal of labor from the
market that
An
is
in Israel.
territories.
Such a correlation suggests
Israeli
is
Israeli
taxes
on
is
demand
essential for developing effective policies
relationship between the Palestinian and Israeli labor markets.
Palestinian Authority
in
response to the
This paper develops a model of the Palestinian labor
used to estimate parameters affecting short-run
understanding of this issue
demand curve
that recent
for Palestinian labor.
governing the evolving
Suppose, for example, that the
able to tax the wages of Palestinians employed in Israel or to impose payroll
their employers.
How much
Palestinian Authority rationally choose to restrict exported labor supply so as to
earnings or tax revenue?
Might the
revenue are such taxes likely to generate?
Of more immediate
relevance, to what extent
maximize
repatriated
do higher wages
offset the
earnings costs of periodic restrictions on Palestinian labor mobility? Answers to such questions turn
1
Wage
differentials
between Palestinians working
declined throughout most of the 1970s (Zakai, 1988).
in Israel
and Palestinians employed locally generally
partly
on the
The paper
Palestinian
of demand for labor services exported by Palestinians to
elasticity
is
organized as follows.
employment
Israel.
II
provides background information on the Israeli-
relationship, describes data
from the Territories Labor Force Survey (TLFS)
Section
and provides a brief empirical description of Palestinian labor market outcomes
Section
outlines a simple equilibrium
III
interact to determine Palestinian
summary and some
that describes
how
wages and employment.
parameters in the model and Section
offers a
model
V
in recent years.
supply and demand for labor might
Section
IV presents
estimates of key
discusses policy implications of the estimates. Section VI
conclusions.
BACKGROUND, DATA, AND DESCRIPTIVE ANALYSIS
II.
employment policy requires workers from the
Official Israeli
through the
(Israel
Israeli
Employment
employ
Employment Service
Service, 1991).
territories to
apply for work
in Israel
(ES), which then channels workers to Israeli employers
The ES
is
the only legal avenue through which Israelis
may
Palestinians, and the Palestinian payrolls of Israeli employers' are supposed to be disbursed
by the ES. The ES
also deducts taxes, social insurance contributions, and union dues
payrolls. Until recently, the
ES was
also the only legal
from these
employment agency for most non-college
educated Israeli citizens, and most job openings in Israel were posted through this agency (Berman
1994).
Legal restrictions notwithstanding,
employed
until the
1991 Gulf War, the vast majority of Palestinians
employers through the ES. Rather, most Palestinians
in Israel did not actually reach their
were contacted
directly
typically record
between 30 and 40 thousand registered Palestinians working for
in the 1980s,
The
Territories
This study
2
the
is
Israeli
employers or through a Palestinian labor contractor.
while data from the Israel Central Bureau of
CBS, 1991) show that
1.
by
Statistics'
Israeli
(e.g.,
100-1 10 thousand Palestinians were employed in Israel, including Jerusalem.
2
Labor Force Survey
based on
until
data
employers
(CBS) quarterly TLFS
TLFS
micro data. 3
TLFS
interviews are conducted
by
local Palestinian
Since early 1991, enforcement of the official work registration requirements has become
Gulf War
ES
March 1993, roughly 70,000
Palestinians
were registered as working for
stricter.
Israeli
From
employers
each month.
'Wage and employment data from the TLFS
are
compared
administrative records in the appendix to Angrist (1994).
to
wage and employment
data from
ES
3
enumerators employed by the
Israeli Civil
frame includes most households
status or
work
in the
Administration in the territories.
West Bank and Gaza
location of the head of household.
contains observations on
men aged
The TLFS
extract used to prepare this paper
18-64, interviewed in the years 1981-91
CBS,
Table
provides descriptive
1
Some 8-10 thousand
statistics for
the sample of
interviews were conducted each year in the
number of completed interviews
especially in the
Gaza
in the
fell
where the uprising
Strip,
The average age of men
in the
sample
is
Gaza
in
Gaza
attributable to the large
started earliest
number of new
force participation, which
at
Employment
shows
is
any given year. The sample sizes
and was most intense.
West Bank. Married men
men
are probably
are often completed
last
The
to 8.6 years in the
descriptive statistics also
that the fraction of the Palestinian labor force
Members of the
column of Table
rates are based
The
1
labor force
by proxy
West bank. This
is
partly
entered the labor force in the 1980s
show
a substantial increase in labor
men aged
18-24.
who were
in the text,
employed as wage-earners was
stable
not employed as wage-earners are either
data analyzed below are for wage-earners only.
show
that
41-50 percent of Gazans were employed
in either Israel
or Jerusalem.
4
in Israel
and
The proportion
on weighted counts from the TLFS. In 1991, there were an estimated 166,000 West
Bank and 102,000 Gazan men aged 18-64 working
working abroad
who
college graduates
35-41 percent of West Bank residents were employed
mentioned
the sample rotation
primarily a consequence of increased participation by
self-employed or unemployed.
These
between 22 and 30
patterns
roughly one-half.
The
Strip and
33 and the proportion married rose from 67 to 75
from 7.7 years
Strip and
(Angrist, 1992; Simon, 1988).
1
region of residence.
The average level of schooling rose considerably over the sample period, from 7.6 years
to 8.8 years in the
Table
are very low (6-9
with the onset of the Palestinian uprising in 1988,
over-represented in the sample because the interviews of employed
2.
constitute the bulk
women
West Bank. Because of
percent in the Gaza Strip and from 64 to 67 percent in the
respondents.
Men
men aged 18-64 by
scheme, only one-quarter of these observations are independent
that the
.
1991).
thousand interviews were conducted each year
show
of the employment
Strip, regardless
of the Palestinian labor force because labor force participation rates for
percent in the sample period;
The TLFS sampling
a few
men
in the reference
as
wage
laborers.
In addition to the
work
locations
are employed in Jewish settlements in the territories and a few were probably
week.
Work
abroad was an important source of employment for residents of
4
was
of the Gaza labor force working
in Israel
from 48 percent
The proportion of
to 41 percent.
stable until 1987; after 1987 this proportion declined
West Bank labor force employed
the
in Israel
increased from 22 to 27 percent between 1981 and 1987, and reached 29 percent by 1991. Between
1987 and 1991 the proportion of the West Bank labor force employed
in
Jerusalem declined from 13
10 percent.
to
Palestinian workers, especially those
of industries.
this
employed
In 1981, half of the Palestinians
in Israel,
employed
in Israel
worked
Palestinians
working
of the Palestinians
in Israel,
in construction;
number
by 1991
was the second most important source of employment
who were employed
in
in their region
of residence worked in the agricultural sector.
manufacturing, mining, other types of industries, and the service
sector has declined as the proportion
employed
in construction
construction and industry account for a larger share of local
Gaza
Strip.
has risen.
employment
Workers employed
in
West Bank than
in
in the
3
This study focuses on recent changes in Palestinian employment patterns.
days worked per month in Table
Gaza
for
accounting for 13-17 percent of total employment. Roughly 20 percent
The importance of employment
the
in a
proportion had risen to 70 percent. Most Palestinians working in Jerusalem were also employed
in the construction sector. Agriculture
the
have been concentrated
Strip and
from 23
Palestinian uprising.
An
difficulties in getting to
1
show
on average
West bank, again a consequence of
important component of this change comes from
1
data
a sharp drop in 1988, from 22 to 17 days for residents of
to 18 days for residents of the
work. Figure
The
the
work absences and
shows the fraction of the labor force absent from work by
work-place location. 6 Data on absences exhibit a seasonal pattern across quarters and a large increase
in
absences beginning in 1988 and during the Gulf
A
related aspect of the changing
War
work environment
which plots the difference between daily hours worked
some of
'Statistics in this
Palestinians
in Israel
is
documented
in
Figure 2,
and locally by region of residence.
in Israel
worked
the sample period (Gabriel and Sabatello, 1986).
paragraph are from Angrist (1994).
employed
for migrants
of 1991.
West Bank who were employed
Until 1988, both Gazans and residents of the
the territories over
in the first quarter
in Israel see
For other analyses of the occupational mix of
Kleiman (1992) and Semyonov and Lewin-Epstein (1987).
"Absentees are defined as labor-force participants
or actively seek work during the reference
week but
job from which they were absent for any reason.
who
did not work, assist on a farm or family business,
reported that they had a job or farm or other agricultural
5
roughly one hour longer per day than men employed locally. Beginning
of workday grows to almost 4.5 hours for Gazans and almost 2.5 hours for residents of the
in length
West Bank.
It
seems
many proxy responses
likely that the
home and
record the time elapsed between leaving
to the
TLFS
question on hours worked
returning. Significant changes in hours
larger for residents of the
Gaza
Strip because
worked
on the job. 7 The gap has
are therefore most likely due to changes in travel time rather than hours
grown
1988, however, the gap
in
time-consuming security measures
at the
Gaza
border are relatively easy to enforce.
3.
Wages and work
location
Figure 3 plots survey data on average real daily wages by work location for the period 1981-91 The
.
TLFS wage
series
Gaza
Israel, the
was computed from the monthly wages of men employed
West Bank, who reported
Strip, or the
real
monthly wages under NIS 10,000
quarter 1991 shekels). Daily wages were computed by dividing monthly
Figure 3 shows a decline in real wages
wage growth
to
grow
until early 1987.
1988 and the
into
Subsequentiy, real wages
flat
for the period
in early 1988.
The
real
fall
real
work
locations in 1984-85, with subsequent strong real
wages of men employed
men employed
fell thereafter; real
that the period
of the
territories
Jerusalem continued
in Israel continued to
at these locations.
wages
in
in the
grow
into 1989.
Real wages in Gaza were
West Bank
fall
1985-1989 was generally one of strong
Israeli citizens as well as for residents
(in 4th
wages by days worked.
wages of Palestinian men employed
sharply for
1987-89 and
Note
at all
in either Jerusalem,
sharply beginning
real
wage growth
for
(CBS, 1992).
Regression estimates are used to describe changes in average Palestinian wages conditional on
demographic
characteristics.
(computed by weighted
log(wJ
(1)
where 8^
and
/3 CT
and 7 P
7
last
is
is
is
=
Table 2 reports parameter estimates from the following equation
least squares using the
5„
+ £c sy^ + L t
a quarter effect in year
an age effect
in year
t,
t,
b^
a schooling effect in year
t,
a^
bi.7*
is
a
CBS
sampling weights):
+ ft +
dummy
E.
c^
+ J^ +
variable that indicates if
a
dummy
variable indicating
ck a
dummy
variable indicating if
is
The TLFS question on hours worked asks "How many hours did
week?" To estimate hours worked per day,
I
va ,
multiplied this
divided by the number of reported workdays in the month.
if
i
i
i
is in
is
is
in
age group c
schooling group g
employed
in industrial
member work
at all
jobs
number by 4.35 weeks per month, and
then
the household
6
sector
and
s
in Israel in
works
in
0,
is
Jerusalem and
^
(1)
falls
of 36 percent
until
an industry wage effect
year and
Column
premium
fi^ is
is
f
;
a
is
a work-in-Jerusalem effect.
is
dummy
t, J
is
:
a
variable indicating
dummy
from 17 Qog) percent
Columns
in 1991.
less than
in
if
i
in Israel.
The
The wage gap
in favor
of
which decline monotonically
men who completed 13-15
Elsewhere (Angrist 1992)
I
years of
discuss the
workers were a major contributing factor
in the
Angrist (1992) also shows that different types of workers were
in Israel at different times,
may
works
1981 to zero in 1984 and 1985, then rises to an all-time high
6 percent for the period 1987-91.
decline in returns to schooling.
schooling coefficients)
i
8
(2)-(3) report schooling coefficients,
slightly.
if
variable indicating
of Table 2 reports estimates of the daily wage premium for working
possibility that shifts in the supply of educated
employed
t,
a work-in-Israel effect in year
1989 and then increase
schooling
in year
reflect
which suggests
that changes in the Israel
wage premium (and
worker heterogeneity. But estimates using panel data show
that
these changes are apparent even after allowing for individual heterogeneity.
The
industry
agricultural
workers
wage
workers earned
in agriculture
community
effects in
columns (4)-(7) indicate that
least
percent by 1988.
30 percent
stable, at
to 15 percent.
Palestinians have the
The
would seem
in Israel
8
are:
in construction
to reflect
relationship between wages
OLS
are:
The omitted
20
and agricultural wages, relative to wages
in labor
markets where
in Israel.
Palestinians
employed
men employed
in Israel, for the years
1987-1991.
25-34, 35-44, 45-54, 55-64. The schooling groups indexed by g
13-15 years, 16 or more years. The industries indexed by
construction, and services.
— to
construction has been fairly
estimates from a simple regression of wages earned by
c
grew
and days worked
on the average days worked by
The age groups indexed by
and almost as much as
however, shrinks from roughly
upward pressure on wages
most employment opportunities
This subsection describes
agriculture,
The wage gap between manufacturing and
roughly 15 percent. The growth
1989, however,
paid to construction workers also
The wage gap between construction and
in the service sector,
4.
in the general service sector,
The premium
By
group (public and
less than those in the reference
more than those
those in the manufacturing sector.
beginning of the sample period
while construction workers earned most.
were no longer paid
services), earned
in the
industry group
is
s are: agriculture,
public and
community
manufacturing and related,
services.
7
Some of these
regressions also include controls for average daily wages of Israeli citizens in Israel
(derived from National Insurance Institute (Nil) data; see Angrist 1994.)
estimates do not have a structural
Palestinians
working
wage
Israeli
Israelis
Adding the average wage of
employed
Israel slightly,
to
in Israel,
estimates from a regression of wages
for the first
two quarters of 1991. Column
on the average daily wage of
Israelis
employed
on days
(2)
Israeli citizens to this basic
and the average wage of
in construction
reduces the coefficient on average days worked by Palestinians in
in agriculture
from -0.17
OLS
War dummies
reports the results of adding Nil data
equation.
days worked by Palestinians
trends.
(1) in the top half of Table 3 reports
worked, quarter dummies, and 2 Gulf
OLS
they document the fact that wages paid to
in Israel are negatively correlated with
even after controlling for
Column
interpretation,
Although these
-0.14.
Separate regression results by industry for
men employed
in agriculture, construction,
and
manufacturing also show a negative covariance between days worked and average daily wages, even
after controlling for
wages earned by
Israeli citizens (except for
example, the estimate of the coefficient on days worked
manufacturing workers).
For
in the construction section in a regression
of log average daily wages paid to construction workers on days of work
is
—0. 16. Note
that for
each industry group, wages paid to Palestinians working in Israel are strongly positively correlated
with the wages paid to Israeli citizens working in those industries.
movement
wages
in Palestinian
reflects
an
Israeli trend
This suggests that some of the
or demand shock, and highlights the
importance of isolating a source of exogenous variation in labor supply that can be used to identify
structural
III.
demand parameters.
THEORETICAL FRAMEWORK
This section develops a theoretical framework that can be used to interpret the impact of exogenous
supply shocks on Palestinian wages and employment. The days worked and daily wages of workers
from the
territories could
possibility of
Israel.
be affected by work opportunities
employment
in Israel should act to close the
in Israel in at least
two ways.
First, the
gap between wages paid locally and
in
This means an increase in wages paid to workers employed locally and a reduction in labor
costs for Israeli employers. Second, higher Israeli
and services produced
worked
to
in the territories.
slow the growth of an
A
wages may stimulate
comparative advantage
industrial base in the
local
demand
in labor services
West Bank and the Gaza
for products
may
also have
Strip (Metzer, 1992).
8
However, the analysis presented here takes the
industrial structure
of
Israel
and the
territories as
given.
The following model
assumed
territories are
describes key features of the Palestinian labor market.
to supply
9
Workers
in the
working days per month according to the following labor supply
equations:
N
(2)
where L
wm
tj(w,,
•
Zj);
,
a per capita supply function,
is
w,
j
=
j
= m,
is
the
I, for local
supply in the territories,
for migrants
wage paid
working
in Israel,
in the territories,
;
paid in Israel, z, and z m are variables that shift the per capita functions, and
working-age population
N
wm
is
is
the
wage
the size of the
in the territories.
Workers employed
locally
cases, the production function
is
produce y„
assumed
and workers employed
in Israel
to exhibit constant returns to scale,
produce y m In both
.
with the following unit
cost functions:
Cj(Wj, Xj);
(3)
where x
is
j
=
I,
m
the price of a second Hicks composite input in each production function.
}
Local demand for the local product, y„
and
in the territories,
N
(4)
where
E=
demand
v/JLm
is
local
assumed to be a function of the wages paid
good,
p,:
the per capita earnings of Palestinian workers, and d,()
component of "export demand" by
good without introducing substantive changes
good
is
in Israel
,
function. This function can include a
Palestinian
Israeli
a,(E, p,)
•
+
w,L,
and the price of the
is
in
=
d,(E, p,)
y»
=
«L(p
a per capita
Israel for the local
what follows. Aggregate demand
assumed to be a function of price, d D (p J. Equilibrium
y,
is
in the
for the
product market requires
(5)
9
This model
is
J
similar to a
,
model of the labor market for immigrants outlined by Altonji and Card ( 199
1
).
9
where
d,
= N
d,(E, p,).
•
Producers are assumed to be cost-minimizers in the factor market, so that conditional factor
demands can be obtained from
we
cost functions
by Shepherd's Lemma. In factor market equilibrium,
therefore have:
Vj
(6)
where
cjt (-)
where
t
}
Cj^Wj,
•
=
Xj )
£j(w„
wm
,
Zj);
j
=
i,
m
denotes the partial derivatives of the unit cost function with respect to wage rates, and
= N
•
Lj.
Finally, firms are
assumed
to
choose a level of output by equating marginal cost to price, where
each firm takes the product price as given. Therefore, product prices are set by
(7)
Pj
Equations
and
in Israel,
=
Cj(Wj, Xj);
(5), (6),
and
(7)
=
t,
m.
determine the equilibrium level of Palestinians' wages paid locally
and the prices of goods produced using Palestinian labor locally and
exogenous variables that
affect equilibrium are the prices of other inputs,
the labor supply functions,
The
j
effect
of
and z m
z,
shifts in
x,
and x m
in Israel.
,
and
The
shifts in
.
exogenous variables on equilibrium wage rates can be obtained by
substituting (7) into (5), and (5) into (6) to give
d,[E, c,(w„ x,)]
•
c„(w„
x,)
=
£,(w„
wm
,
z,)
(8)
d.[c.(w„ xj]
•
c nl (w n ,
xj =
t n (w„
w B zj
,
This substitution eliminates the endogenous product prices and leaves a pair of equations that jointly
determine the wage rates,
w, and
Taking logarithms and
satisfy the following
wm
.
differentiating, the proportional
two equations:
changes in wage rates can be shown
to
10
[{X,+i7 / ,-e„]d//iw, + [^Xin -€ < Jd/nw IB
= e h (l-^)d//i2,- CllB(l-^d//izB -ij <xd//ix
(9)
-
e a ,dlnw,
+
[ri
mm
- e^dlnw^
=
where e^
wm
k
,
=
at location
product,
and k
w,;
for
I
e^dlnza
the elasticity of labor supply to location
is
=
z for z m or
with respect to factor price
j
y„
<t>
=
dlnE/dlnw, and X^
w,£,/E
=
is
/
k.
j
i]
axdlnx m
£
is
,
with respect to argument k
Similarly,
z,).
10
-
the income elasticity of
demand
for
demand
the elasticity of factor
is
j/^
= m
(k
for the local
the share of local earnings in total labor earnings, and
X,
=
d//zE/d/nw m characterize the impact of wages on earnings."
Given estimates or assumptions about the underlying
structural parameters,
system
(9)
can be
used to predict the impact of exogenous demand shocks (components of dlnx,, dlnx J and supply
shocks (components of dlnz,, dlnzxj on Palestinian wages and employment.
provides a framework for estimation.
Note
that the terms in (9) can
This system also
be re-arranged and simplified
as follows:
d/nw,
= (I/tihWM, -
(£/i?„)d//iE
-
(r)jti„)dlnx„
(10)
At
this point, the definitions
any
of d/nx m and dlnx, are expanded to include labor demand shocks of
sort, as well as shifts in the prices
of other factor inputs.
12
dlnxm and dlnx, can therefore be
interpreted as error terms for the purposes of structural estimation.
Supply shocks
that are
uncorrected with these error terms (or transformations of the error terms) can be used as
instrumental variables to identify the parameters in (10).
10
and
This
is
the total elasticity of
elasticities
of factor substitution
"These parameters are X,
12
The
demand
role of
x,
and
(including scale effects), derived from the Hicks-Marshall formulas
(see, e.g.,
Hammermesh,
= #l+e«) + ^(l-tf)
x,,,
and \>
in the theoretical product
components are interpreted as a vectors of variables
1986).
=
(l-Ml+O
+
e, m<f>.
demand equations can be generalized so
that include prices
of other factor inputs and a generic
demand shock. The product demand equations then become:
y,
The only
=
d,[E, c,(w„ x,), x,]
;
ym
=
djcjw,,, xj>
implication of this change for equation (9)
is that
ij
(i
*J
and
•
tj
that these
to
must be redefined.
11
IV.
STRUCTURAL ESTIMATION
The supply shocks
to be used for instrumental variables (TV) estimation consist of a quarterly
time series data on person-days under curfew
Army
data appendix.
disturbances in the territories.
civil
The most prominent
Figure 4 also shows
days under curfew
combined with
feature of Figure
positively correlated with the
4
is
Both series are described
in the
the extended curfew during the Gulf War.
IDF
series
on
civil disturbances.
The curfew
are useful here because curfews and closures of the territories have a major impact on the
of Palestinians working
Israeli
with the exception of the Gulf War period, the Palestinian series on person-
that,
is
Strip,
Figure 4 plots the Palestinian curfew data along with the Israel
data on civil disturbances.
Defense Forces (IDF) data on
West Bank and Gaza
in the
in Israel.
It
data
number
should be noted, however, that curfews are often imposed in
response to disruptive incidents or personal attacks that can directly or indirectly shift local labor or
product demand as well as labor supply to
disturbance data
is
IDF
that the
Israel.
The value of having both
the curfew and
data on disturbances can provide a partial control for the local
disruptions associated with incidents leading to curfews.
1.
Measurement framework
DDF
In addition to using the
structure
in the
disturbances data as a control variable, a variance components
introduced to allow for the fact that supply shocks like curfews and closures can appear
is
demand equation or be
associated with variables that have an impact
denote a vector of candidate instruments that might
zm
and
in the notation
z,
demand shocks
in
period
t
shift labor
of the previous section).
The
on labor demand. Let
Z,
supply at either location (Z, includes
candidate instruments are connected to
as follows:
(11)
where tb and x, are population regression
uncorrected with
and v,
is
Z,
by construction. As an
restricted to
Assumption
1
coefficients and u mt
identifying assumption, the relationship between
be proportional:
ir a
=
kt,
for
and u„ are random components
some
constant, k.
ir m
12
In other words, the elements of Z, can be bundled in a linear combination that captures
demand shocks generated by
Assumption
in the
1
is
more than
requires
generate an estimating equation, the
linear, so that
when
/nw n
(12)
,
Note
that if Z,
itself is
the
a scalar,
not really a restriction. In practice, however, identification of structural parameters
demand equations
To
Z, up to a factor of proportionality.
all
=
equation (10)
K/nw,
demand
functions are assumed to be approximately log-
quasi-differenced across locations in period
is
+ (1/OfoC -
t
a single instrument.
(Khtdlntn
+
Oc$/ij„)/nE,
—
Quasi-differencing removes supply shocks other than (u^
error term in equation (12)
is
tcu tt)
therefore uncorrected with Z,,
+
(u m
t,
we
- kuJ
have:
.
from the demand equation. The
and elements of Z, are available as
instruments.
Finally, an estimating equation for individual observations
(12) holds for average log
wages
in period
possibility of composition effects as
for workers
workers move
level regressors, X*, is also included.
Israel
t
in
In particular,
is
derived by assuming that equation
employed
in Israel.
But to allow for the
and out of the labor force, a
I
set
assume the wages of worker
i
of individual-
employed
in
can be written:
//zw mt (i)
=
+
Inv/^
Xh/S
+
ut (\)
,
or
Inv/Ji)
(13)
=
ic//iw ft
+
where p (i)
t
is
+
{XlitJlntn
+
X,fi
{(Unt
-
-
Oc/ij„)/fif„
«i„)
+
pt (i)}
+ Wv^lnE,
,
an error term that has mean zero each year by construction (because
dummies). The individual-level regressors should help control for the
can affect the demographic mix
(e.g.,
of Palestinian workers coming to
To
illustrate
how
by favoring married and
skilled
fact that Israeli
Israel.
instrumental variables can be used in this model, suppose
of Table 3 and are reported in the bottom half of Table
of linear and quadratic terms
total
of 4 instruments.
in
curfew policies
workers) as well as the number
estimates using curfew data in such a specification correspond directly to the
in the top half
XH includes year
person-days under curfew
in the
3.
OLS
The
*=0
and 0=0. IV
estimates reported
instruments consist
West Bank and Gaza
Strip, for a
Estimates of the coefficient on days worked can be interpreted as estimates
13
of (l/'Jmm)
m th e restricted model.
The
are pooled, suggesting an aggregate
of
Israeli
rises.
The IV
citizens are
when
partial
in this
The over-
shifts.
improves
fit
data on the wages of Israeli citizens are added, but the test statistics consistently
how
is
also highly at odds with the data.
the curfew data can be used
worked by work
location.
when
A positive relationship
IV problem
relates
the relationship between
in the
is
given in Figures 5-7, which
is
k
is
set equal to
1
and
rf
ma =rj n
wages by work location
.
to the
Figure 5 plots the relationship between the Israel/West
difference and person-days under curfew in the
days worked
industries
all
These estimates
reported at the bottom of Table 3 indicate that the
In this case, (13) simplifies to an equation relating the difference in
quarter effects.
to -4.5.
demand
control for
present a graphical depiction of IV estimates of equation (13)
Bank wage
when
somewhat but remain negative when the average wages
added to the model as a
alternative illustration of
difference in days
to -.28
and wages go up when the number of person-days
fall
suggest that this highly restricted specification
An
from -.23
on the order of -3.5
elasticity
estimates decline
identification test statistics
considerably
demand
work days
are a consequence of the fact that
under curfew
resulting estimates range
West Bank,
after regression-adjusting for
The second reduced-form
apparent in the figure.
equation
days worked to the number of person-days under curfew. Figure 6 shows
West Bank curfews and the
West Bank
(after partialing
difference between days
out quarter effects).
The
worked
in Israel
and
slope of the line in Figure
6 suggests a clear negative relationship.
Finally, Figure 7 plots the
therefore a picture of the
of the line
approximately
demand
2.
IV estimate of a
in the figure is
days under curfew
in the
- 1.4.
two Y-axes
in
labor
Figures 5 and 6 against one another. Figure 7
demand curve
in this restricted
model.
The
is
slope
approximately —1.3. The slope of the same line computed using person
Gaza
Strip and using the
Gaza
Strip
is
as the comparison region
is
In the context of equation (13), these relationships imply that short-run Israeli
for Palestinian labor
is
not very elastic.
Parameter Estimates
When
estimating equation (13) without k restricted to be zero, a local region for quasi-
differencing has to be chosen to control for
demand shocks
correlated with the instruments.
Empirical results are reported here for comparisons to both the West Bank and the Gaza Strip. The
dependent variable
Men employed
in
is
the log of positive real daily wages for the sample of
men employed
in Israel.
Jerusalem are excluded from the analysis. The regressors include the quarterly
14
average log local wage in the comparison region (West Bank or Gaza Strip) by industrial sector
(agriculture, construction, or other), the quarterly average log days
worked
quarterly average log days
monthly wages (over
real
CBS
all
in the
worked
sectors) in the comparison region.
allows for an industry-specific constant.
13
This procedure
To compute
and IV estimates.
treated as endogenous: days
worked
comparison region, and average
in Israel,
total
sector, the
Averages were computed using the
men from
days worked
the
different industries but
equivalent to estimation of (13)
is
separately by sector, with the restriction that the parameters of interest are the
OLS
by
comparison region by sector, and the log of total per capita
sampling weight and excluding outliers. The estimation pools
Table 4 reports
in Israel
IV
in the
same across
industries.
estimates, four variables
comparison region, wages
earnings in the comparison region.
14
The
instruments include linear and quadratic terms in person-days under curfew in the
were
in the
four excluded
West Bank and
person-days under curfew in the Gaza Strip. Other regressors included in the equation and instrument
list are:
linear
and quadratic terms
quarter dummies,
number of
civil
disturbances in the comparison region, 3
4 year dummies, 2 Gulf-war quarter dummies, 2 industry dummies, and
individual-
and schooling dummies as
in equation
level regressors including
(1),
in the
dummies
for marital status, and age
without time-varying coefficients. The year dummies control for annual macroeconomic shocks
in Israel, as well as
changes related to the wave of immigrants that began to arrive in 1990, although
come
dramatic changes in the size of the labor force do not
If
no additional
restrictions are
until 1991.
imposed or instruments added, the parameters
are just-identified. Part of the identification therefore
comes from the fact that quadratic functions are
If there is
an omitted nonlinear term in one
To provide some
evidence on the validity of the
used as instruments while the regressors are log-linear.
of the regressors, identification breaks down.
in equation (13)
orthogonality restrictions, and to see whether the estimates are sensitive to alternative identifying
assumptions, additional restrictions were imposed one
13
In principle the
qualitatively similar.
14
model applies industry by industry but
Only pooled estimates are reported
Average earnings are not linked by an
latter variables calculated for
results
from models disaggregated by industry are
to save space.
identity to local
and
Israeli
wages and days worked because the
a work location while average earnings are calculated for a region of residence.
Average earnings by region includes counts of zero earners
are available for this sample.
at a time:
in the
denominator.
No data on non-wage income
15
income
Assumption 2a
(the
Assumption 2b
(demand
elasticities
proportionality);
Assumption 2c
(local
and
of local product demand
elasticity
Israeli
is
zero);
£
=
0.
and demand shocks are related by the same factor of
tj„
=
kt/^
.
demand shocks induced by
Given one or more of Assumptions 2a, 2b, or 2c, equation (13)
Z,
are the same);
k
=
1.
over-identified and subject to
is
partial validation using data.
Results using the
Gaza
Strip as a
comparison region appear
in the first
5 columns of Table 4
and results using the West Bank as a comparison region are reported in columns (6-10). The results
on the regressors
are reported as coefficients
comparison region
of
on log
Columns
(that the
(1-2) report
income
the coefficient
in the
earnings
elasticities (tj^,
OLS
elasticity
k,
worked
total per-capita
column, the implied
in each
OLS
an estimate of
the coefficient on days
l/rt mm ,
the coefficient
2a
is
equation (13).
in
is
on log days worked
an estimate of
,
K^/ti lt
is
in Israel is
in the
an estimate
an estimate of —k/i}„,
Below
.
on log wages
and
the estimates reported
£) are also reported."
and IV estimates for the Gaza Strip comparison under assumption
of agricultural product demand in the comparison region
zero.)
is
The
estimates are unlikely to have a structural interpretation, but they are reported for comparison
OLS
estimate of the Israeli
purposes.
In this case, the
estimate
negative, though imprecisely estimated.
Gaza
coefficient
comparison region
m and
ij
The
is
Strip as a
-2.2, with local
demand suggest
industries
models
Israeli
demand
elasticities
between -.76 and
Estimates of the income elasticity of product
income do not generate large changes
in
product demand for the
in
the data well.
columns
(1-2),
OLS
estimates of
1/tj,^
using the West Bank as a comparison region
(column 6) are positive while IV estimates (column 7) are negative.
columns (7-10) support the notion
out of four of the estimates of
that negative
\lr^ am
are in the
demand
wage premium
for married men.
The age
Most of the IV
elasticities explain
same range
wage
coefficients imply a
The marriage
results in
increases and
as those in columns (2-5).
"Coefficients on the individual-level regressors are not reported.
percent
IV
employing wage-earners. Finally, the chi-square goodness-of-fit statistics suggest that these
fit
As
elasticities in a similar range.
that declines in
elasticity is positive but the
Other IV estimates based on models using the
comparison region generate estimated
demand
demand
The
two
results
coefficients suggest a 5
concave earnings
profile.
16
in
column 9 corresponds most closely
to the graphical representation in figure 7.
But some
results
(such as those in column 10) clearly cannot be rationalized in the context of the model outlined here.
On
the other hand, estimates using the
West Bank
as a comparison region are associated with
larger values of the goodness-of-fit statistic than estimates using the
region.
the
Gaza
Strip as a
much
comparison
This suggests that the restriction motivating IV estimation are more likely to be satisfied for
Gaza
Strip
comparison used
in the
models underlying columns
(2-5).
16
V. Policy Analysis
Empirical results from the previous section can be combined with the theoretical framework from
Section
market.
III
to evaluate the possible impact of policies that reduce Palestinian access to the Israeli labor
To
illustrate the potential labor
who were regularly employed
or unable to
come
to
work
at current
half the workers
in Israel (including
wage
enforcement of access rules, the sale of
Suppose also that
shifts,
I
use the general comparative
and a simple numerical example. Suppose that half of the roughly 105,000
statics relationship, (9),
Palestinians
market impact of supply
rates.
Israeli
Jerusalem) before 1991 were unwilling
This shift might be the consequence of
work permits
stricter
to workers or employers, or both.
local (in the territories') labor supply shifts to partly offset this reduction, so almost
who used
means about 26,000 new
to
work
in Israel are willing to
local workers, implying
work
locally at current
an increase of a
little
wage
rates.
This
over 15 percent in local labor
supply.
The
possible consequences of such a scenario are described in Figure 8, which shows a range
of solutions to equation (9) when
e
mdlnz m =
-0.50 and
assuming an income
demand
is
elasticity
elasticity
assumed to be -1.
of demand of
1
The upper
for the local product; the lower part
was
calculated
These parameter choices are
"The notion
that
Gaza
is
that feeds
solutions are
calculated
of demand equal to 0. In both halves, the local
demand
The
was
Table 4 because the table shows no evidence of a highly
price-elastic local product
+0.15.
part of the figure
presented in terms of the impact on labor earnings.
assuming an income
=
e u dlnz,
in the
elasticity
of labor
range of estimates reported in
elastic local
demand
for labor or a highly
back into local labor demand.
a better comparison region
is
supported by Razin and Sadka (1993, p. 86),
who
note that, "... the Intifada (in Gaza) disturbed mostly the work of Gaza's residents in Israel." They also note
that non-agricultural sectors in
by industry
fit
the data
Gaza economy were hardest
on Gazan
agricultural well.
hit
during the uprising. Estimates of equation (13)
17
Four
lines are
about supply
graphed
elasticities.
labor in Table 4
is
17
in
each half of figure 8, corresponding to four different assumptions
The median
between -1.1 and
estimate of the elasticity of Israeli
Figure 8 suggests that for
-2.2.
demand
is
reduce
earnings by
total Palestinian
sufficiently inelastic, total earnings
elastic
more than 20
may even
demand) seems unlikely, both the
wage responses have worked
to
dampen
percent. If Israeli
Although the
rise.
50
elasticities in this range, a
percent negative shift in labor supply to Israel, offset by a 15 percent positive local
to
for Palestinian
demand
shift, is unlikely
for Palestinian labor
latter possibility (less
than unit-
theoretical and empirical analysis suggest that past Israeli
the aggregate earnings impact of reduced access to the Israeli
labor market considerably.
Finally, note that unless local product
demand
for
elasticities
much
demand
is
highly income elastic, these conclusions hold
larger in magnitude than -2 as well.
of any behavioral response depends partly on whether the shock
as
The example
permanent or temporary.
economic theory suggests
that the product
VI.
A
be larger than short-run
the other hand, the magnitude
viewed by workers and employers
in this section takes all elasticities as fixed,
whereas
market response to permanent income shocks should be
larger than the response to transitory shocks.
likely to
is
On
elasticities
Similarly, long-run elasticities of labor
demand
are
of labor demand.
SUMMARY AND CONCLUSIONS
range of graphical and
statistical
evidence supports the claim that exogenous decreases
Palestinian labor supply are associated with an increase in the
workers.
IV estimates of demand equations
specification, but the best-fitting
Palestinian
Palestinian labor ranging between
"Supply
somewhat
models consistently suggest
wages and days worked can be
demand shocks by
are
wages
rationalized
Israeli
by a short-run
—1 and —2. Even
employers pay Palestinian
sensitive to the details of
that the
in
model
observed covariance between
Israeli elasticity
of demand for
simple IV estimates that do not control for
18
quasi-differencing imply a short-run elasticity of between -3 and -4.
elasticities are
assumed to be equal for both
locations,
and
cross-elasticities equal to
minus the own-
location elasticity. Another assumption used to construct the figure is that the share of local earnings in total
labor earnings
(<t>)
is
fixed at
60
percent.
"This finding contradicts those in Fishelson (1992),
log wages on the
number of Palestinians employed
macro model for a long time period
that
who reports a positive coefficient from a regression
in Israel.
ends in 1986.
of
But his estimates are from a large multi-equation
The Fishelson
results therefore
do not seem
directly
18
More and
better data
on the Palestinian labor market may
work. In the meantime, the results presented here suggest
more robust
results in future
market policies
in the territories
lead to
that labor
should be analyzed with a number of possibilities in mind. First, and most important, short-run
Israeli
demand
for Palestinian labor
from reduced access
may be
inelastic
enough
to considerably
to the Israeli labor market, at least for a while.
A
dampen
the earnings loss
Palestinian social planner
might even choose to exploit the resulting monopoly power by deliberately restricting supply. Of
course, social planners would also consider factors like the distribution of unemployment and the loss
of
skills
among
the unemployed.
Such consideration might well outweigh simple calculations
designed to maximize earnings or income tax revenues.
Finally, the use of a
model and associated empirical
results for forecasting is
future economic circumstances are likely to be similar to past circumstances.
emphasize
setting
this in a
most helpful when
It is
important to
study of Palestinian-Israeli labor relations because behavioral responses in this
depend partly on whether
local residents
and
Israeli
employers perceive shocks as transient
or permanent. Since the strong transitory shocks studied here are probably unusual, changes in access
policy that
different
come about
as part of a deliberate regime shift could
from those of past shocks.
comparable to those reported here.
have labor market consequences very
19
Table
A.
Descriptive Statistics*
1.
Sample
Years of
Size
Schooling*
Wage
LFP
Age
earner
Work
Days
worked
Married
22.2
0.67
0.47
in Israel
Residents of the Gaza Strip
1981
7,854
7.61
33.0
0.78
0.50
1982
8,223
7.92
32.6
0.77
0.51
21.9
0.68
0.48
0.50
21.6
0.66
0.50
0.50
21.9
0.66
0.49
1983
8,228
8.18
32.7
0.76
1984
8,930
8.33
32.9
0.76
1985
9,271
8.40
32.7
0.77
0.51
21.7
0.67
0.50
1986
9,743
8.69
32.4
0.77
0.51
22.3
0.66
0.49
1987
9,692
8.62
32.7
0.80
0.52
22.0
0.69
0.49
1988
6,932
8.48
32.9
0.79
0.49
16.9
0.70
0.48
1989
7,830
8.52
33.3
0.77
0.45
15.6
0.71
0.42
1990
8,892
8.63
33.2
0.80
0.47
16.5
0.73
0.44
1991
8,011
8.80
33.2
0.80
0.48
17.2
0.75
0.41
B. Residents of the West
Bank
1981
21,768
7.66
33.2
0.70
0.47
21.9
0.64
0.36
1982
21,992
7.82
33.3
0.72
0.47
22.4
0.63
0.36
1983
22,734
7.90
33.3
0.74
0.47
22.1
0.64
0.38
1984
23,807
7.98
33.3
0.76
0.48
22.1
0.63
0.38
1985
25,038
8.11
33.1
0.76
0.47
21.8
0.62
0.36
1986
26,394
8.26
32.9
0.79
0.48
22.2
0.62
0.35
1987
29,530
8.27
32.8
0.81
0.52
22.5
0.63
0.40
1988
27,593
8.36
32.7
0.83
0.52
18.1
0.63
0.40
1989
27,462
8.48
32.6
0.83
0.53
18.9
0.64
0.41
1990
27,773
8.49
32.8
0.82
0.52
19.5
0.66
0.39
1991
26,128
8.60
32.7
0.80
0.51
17.4
0.67
0.39
'
Statistics are
Sample
unweighted, except for the
size:
observations.
last
373,825 men aged 18-64
two columns which are based on weighted counts.
in
the sample period;
one-quarter of these are independent
20
Table
2.
Daily
Wage
Equations (Selected parameter estimates)*-
Work
Educa-
Educa-
in
tion
tion
Israel
13-15
16 +
(1)
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
(2)
Industry
(3)
wage
effects
1
4
5
Agri-
Manu-
Cons-
Servi-
culture
facturing
truction
ces
(4)
(5)
(6)
(7)
0.166
0.229
0.392
-0.214
-0.076
0.095
-0.118
(0.007)
(0.007)
(0.018)
(0.011)
(0.011)
(0.012)
(0.012)
-0.077
0.167
0.191
0.346
-0.215
(0.007)
(0.015)
(0.017)
(0.014)
(0.01231)
0.066
-0.136
(0.011)
(0.012)
0.150
0.156
0.340
-0.133
-0.039
0.094
-0.100
(0.007)
(0.014)
(0.016)
(0.013)
(0.011)
(0.010)
(0.012)
-0.003
0.127
0.308
-0.321
-0.121
-0.005
-0.139
(0.007)
(0.012)
(0.015)
(0.013)
(0.011)
(0.010)
(0.012)
0.006
0.117
0.250
-0.246
-0.087
0.014
-0.105
(0.007)
(0.012)
(0.014)
(0.012)
(0.011)
(0.010)
(0.011)
0.123
0.086
0.222
-0.148
-0.038
0.097
-0.038
(0.006)
(0.011)
(0.014)
(0.012)
(0.010)
(0.010)
(0.011)
0.189
0.055
0.225
-0.056
0.029
0.126
-0.006
(0.006)
(0.011)
(0.013)
(0.012)
(0.010)
(0.010)
(0.010)
0.248
0.009
0.145
0.006
0.050
0.190
0.022
(0.006)
(0.010)
(0.013)
(0.012)
(0.010)
(0.010)
(0.011)
0.336
-0.001
0.116
0.087
0.063
0.216
0.047
(0.006)
(0.010)
(0.012)
(0.012)
(0.010)
(0.010)
(0.0U)
0.312
0.055
0.156
0.089
0.058
0.215
0.038
(0.007)
(0.010)
(0.012)
(0.012)
(0.010)
(0.009)
(0.011)
0.357
0.041
0.164
0.046
0.049
0.201
-0.022
(0.007)
(0.010)
(0.012)
(0.012)
(0.011)
(0.010)
(0.012)
'Estimates of equation (1) in the text. Sample size for
public and
1'
community
services.
Standard errors in parentheses.
Sample weighted by
all
years combined
CBS
=
173,588. The omitted industry
sampling weights.
is
Table
Relationship Between Daily
3.
Wages and Days Worked by
Agric.
All
OLS
Manufact.
Construct.
(2)
(3)
(4)
(5)
(6)
(7)
-0.17
-0.14
-0.11
-0.08
-0.16
-0.11
-0.13
0.02
(0.01)
(0.01)
(0.07)
(0.02)
(0.01)
(0.01)
(0.02)
(0.06)
(1)
A.
Industry (undifferenced equations)*-*
(8)
Estimates
Days
worked
Log average
employed
daily
wage of Israeli
citizens
in:
Construction
Agriculture
0.19
0.75
(0.07)
(0.03)
0.35
0.72
(0.07)
(0.06)
Manufacturing
1.0
(0.15)
B.
IV Estimates
Days
worked
Log average
employed
daily
-0.28
-0.23
-0.22
-0.15
-0.30
-0.22
-0.21
-0.10
(0.01)
(0.01)
(0.03)
(0.03)
(0.02)
(0.02)
(0.02)
(0.04)
wage of Israeli
citizens
in:
Construction
Agriculture
0.43
0.73
(0.07)
(0.03)
0.09
0.70
(0.07)
(0.06)
Manufacturing
.60
(0.16)
Over-id x2^)
173
41
48
11
199
32
39
35
The
top panel reports OLS estimates from regressions of the log of real daily wages for Palestinian men
employed in Israel on quarter dummies, two Gulf War dummies, average log days worked in Israel, and log
real wages of Israeli citizens by industry. The Israeli wage series are quarterly by major industrial sector, from
the National Insurance Institute. The bottom panel reports IV estimates from the same specification using linear
and quadratic terms in person-days under curfew in the West Bank and Gaza Strip as instruments. The sample
includes 39,806 observations on Palestinian men employed in Israel: 5,603 employed
employed in construction, and 11,921 employed in manufacturing.
''Standard errors in parentheses.
in agriculture,
22,282
c_
u
11
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b
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ations
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Estimates
o
X
1
and
•o
E
z
»
I
1
S
a.
P-
w
1
X
<5
dummies
includes
Notes:
t
I
u/
23
30
1
1
1
n
25
ii
ii
ii
ii
I 20
S
1
jlfl
Ii
cB
1
ii
•
i
A/i
8
|
1
Hi
i.i
i:i
i
15
y\
isi
\
f\\
ili a / \ »
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I fcv
111
li A M•111
1
1
1 • / V r* 1
'I
'1
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V
i::i
mi
l.'Sl
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1
10
i
n
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n
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a
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•
f
/*
I
/ i
*- —yv^ A
/•**
a
a
V^i"
A
'^A^AuA ^"V\\>^"
AV\
yXV
nArJ^vw
•»'/^'yvVAn'A4
5
1
«•* \
\/
>
li.il
\yi # n'i/yi
v\\/ yVfti
\
t
u
w
— y^A
...,,-
Figure
1.
1962
1983
Absences from Work by
1984
1985
Men Aged 18-64
1986
in the
1987
1988
IV*
1/
S
i
"-'
'
1989
1
*
i
'.
»
1981
A>i
•TV
•
a
#
lit*
•«
U
1
1
-
'X
1990
1991
Labor Force.
4.5
4.0
Gaza
West Bank
3.5
J
i
1981
Figure
2.
1982
Extra Hours to Get to
1983
Work
1984
in Israel,
1985
1986
1987
1988
i
i
1989
i
i
i
i_
1990
by Region.
Tabulated from reported hours of work by region and work location; excludes Gulf-War quarters.
"91
24
'^
65
r
J
Israel
60
——— W
.._._._._.
T
fl
fl
ft
#
1
tt
8.
s*
50
fl
x '
•
A>
i
fl
»t
*..
/L\l
/I*
. *
'1*1
A
'
•
//
\
-
V
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v
\^
40 U K
v »-
\\
*/
•
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*/
A
\
/
.-A
v*
\
\
1
*
V"
/
v \
\
v
y
i
i
i
i
1981
Figure
3.
i
i
i
i
1982
i
i
i
i
1983
i
i
i
i
i
i
i
\
\
*
-
V
1/
*"*
\A
V \
\
i
\
1
\
35
VvA\\\
\
1
r-v
i
#
t
»
1
I
v
/
"
i
\
\
»
»
»Vi
1
\y
x
i
*
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\~
.\
•
»
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/\
1
'"
•'
\
V
1
•
45
»>.»
f\
A///"n /
\AV^**V?\\
>M/&/\M\A«
Y-'/ I
v
*>. ,-/ V
/y
5\V
r^»^v
s \v /
ai
i
.a<
Xx\
»
\
Xj*
* /
\
»
/r\ /
/
/' V^ *«^
i
•
A
f
f
/./A
i/
if // 11
»
i
#
.
»
t
t
i
i
>
11
»».
f
_
i
%
/
i
>
t
f
ff
/ 1
I
x ~—_,A
\
1
•
#
1
/
i
i
i
/
/t
•
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!
1
.
•
55
\
f\
SiBm
Bank
n.Dann
i
1984 1985
i
i
i
i
1986
i
i
i
i
i
i
i
i
1987 1988
i
i
i
i
1989
i
i
i
i
i
1990
i
i
100r
80
Curfews
Disturbances
60
40
-
°
-
r—
1987
1988
4. Disturbances and Curfews in the
Data from Palestinian and IDF sources.
Figure
Territories.
1989
1990
i
1991
Real Daily Wages by Work Location.
20
,
1991
25
••
0.15
-
0.10
-
06
—
•
°
|
f
J
-
^^^^
006 -
•
^^^"^
•
-o.oo
•
•
•
•
•
-O.10
-
-0.16
-
•
••
•
•
i
-
Figure
5.
-4
5
-3
-2
-1
O
1
2
Thousands of parson-days undar ourtaw
Curfews and Israel/Local Differences
•
in
3
4
(i
Daily Wages.
•
•
0.1 o
•
COS
I1
^_
TS^^
f
£
a>
•
0.00
•
•
-O.OS
*
••
-O.IO
-B
-4
-3
•2-10
i
1
2
Thousands of parson-days undw ourtaw
Figure
6.
Curfews and Israel/Local Difference
in
Days Worked.
3
4
1i
26
0.56-
m
0.50-
0.4S-
5,
.2*
0.40(
f
0.3C-
0.30-
0.25-
-I
-0.35
DWeranoa
Figure
7.
-0.20
days worfcad
TV Estimates of a Labor Demand Curve.
1.8
8.4
In
_l_
L.
I
-0.25
-0.30
•1.6
-1.4
-1.2
-1
-8.6
-B. 8
elasticity of denand
-8.4
-8.2
8
-
Incone: elasticity
?
8
local denand; elasticity = -1
„ supply elasticity » 8
•__• siipp 1 y "el'ast
i'cl ty "i" VS
.. supply elasticity » 1.5
_. supply elasticity = 2.5
_.s...
"
-8.2
-
Figure
8.
Earnings Impact of
+15%
Local and
-50%
Israel Supply Shocks
-0.15
27
Data Appendix: Curfew and disturbance data
a.
Curfews
The Jerusalem Media and Communications Center (JMCC) compiles
in
press releases and monographs
an effort to represent Palestinian positions to members of the press. As part of this
JMCC
collects data
on the number of days under curfew by
inflate these data into statistics
were taken from a
locality,
effort, the
and uses population data to
on person-days under curfew. The curfew-incidents data used here
JMCC data set
listing
curfew incidents by month and locality between December
1987 and December 1991 The JMCC data on curfew incidents were compiled primarily from reports
.
by
local observers,
from press reports and from
UNWRA records
(JMCC,
1991). Local population
data used to inflate the incidents data were taken from Benvenesti and Khayat (1988). These two
were then combined
series
to
construct aggregate time series on person-days under curfew.
Unpublished data on curfews from a second Palestinian source for the period December 1987
November 1988 (Al-Haq
are the
b.
IDF
in
Ramallah, West Bank) are highly correlated with the
JMCC
to
figures, as
data on civil disturbances in the territories.
Disturbances
The IDF compiles data on the number of Israeli
citizens, local residents,
and soldiers injured or killed
each month in the territories, on the number of attacks by local residents on Israeli citizens and
soldiers (with and without use of firearms), incidents of arson,
attacks,
and the number of
spokesman's
office.
road blockades,
The
civil
civil
disturbances. These series
Molotov cocktails thrown, grenade
were provided
to
me by
the
IDF
disturbances series includes a count of incidents of stone-throwings,
tires set ablaze,
and unruliness. The data do not include incidents involving firearms.
28
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