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Why have Israel and the Palestinians failed to implement a 'land for peace' solution, along the lines of the Oslo Accords? This paper studies the application of strategic behavior models, in the form of games, to this question. I show that existing models of the conflict largely rely on unrealistic assumptions about what the main actors are trying to achieve. Specifically, they assume that Israel is strategically interested in withdrawing from the occupied territories pending resolvable security concerns but that it is obstructed from doing so by violent Palestinians with other objectives. I use historical analysis along with bargaining theory to shed doubt on this assumption and to argue that the persistence of conflict has been aligned with, not contrary to, the interests of the militarily powerful party, Israel. The analysis helps explain, from a strategic behavior perspective, why resolutions like the Oslo Accords, which rely on the land for peace paradigm and on self-enforcement, have failed to create peace. [ABSTRACT FROM AUTHOR]

This paper studies the gender wage differential in the Palestinian labor market of the West Bank before, during, and in the aftermath of the second Intifada. We combine data on the Palestinian labor force, politically motivated fatalities of Palestinians, and movement restrictions in the West Bank, in order to quantify the effect of political violence on the gender wage gap. We find that political violence during the second Intifada decreased the gender wage gap. We also observe a long-term trend of more women entering the labor force, especially in middle-income occupations where there is an existing large share of female employees. Political violence did not seem to reverse or hurt that trend. We provide suggestive evidence that the reduction in the wage gap is due to the increased supply of low-skilled men, who previously worked in Israel and entered the local labor market due to the Intifada. [ABSTRACT FROM AUTHOR]

This paper examines the mechanisms which drive the different political attitudes of Israel's two major Jewish groups – the Ashkenazim and the Mizrahim – vis-à-vis the Israeli-Palestinian peace process in the 1990s. The study argues that the economic liberalization reforms of the 1980s along with the subsequent Israel's integration with the global economy are key drivers of the two groups' opposing attitudes vis-à-vis the peace process. These processes benefited mainly the business classes, who are dominated by the Ashkenazim (originating from Europe). It was such benefit that drove Ashkenazim's support for the Oslo Accords in the 1990s, which was seen as instrumental to the process of Israel's integration with the global economy. Conversely, the same economic processes likely hurt lower-class members of Israeli Jewish society, most of whom are Mizrahim (originating from Muslim countries). In this context the settlements in the West Bank and Gaza provided them with an alternative source of welfare to buffer the negative impacts of the integration process. As a result most of the Mizrahim population opposed any peace deal that included the evacuation of settlements. Moreover, Mizrahim's opposition to Oslo was strengthened by the association of Oslo with Israel's global integration, which some evidence suggests mainly benefited the business classes. [ABSTRACT FROM AUTHOR]

In this paper, we analyze the Israeli-Palestinian conflict by proposing a proxy war model, where conflict lasts longer, but it is less costly than direct military confrontation. In proxy wars, Nash equilibria are realizable, but not always sustainable in the long-run. The consolidation level of the double principal–agent relationship predicts the continuation of conflict and thus the emergence of peace. As our model suggests, the Israeli-Palestinian conflict is likely to remain irresolvable, as long as the Palestinians do not have a principal that is willing to provide continuous and positive levels of conflict involvement. [ABSTRACT FROM AUTHOR]

This paper addresses the issue of the impact that armed conflicts have on capital markets. It focuses on the recent Israeli military offensive in the Gaza Strip launched in late 2008 and concluded in early 2009. The paper examines the effects of this armed conflict on the return and volatility of the general index of the Tel Aviv Stock Exchange (TASE), as well as on the government bond index. Furthermore, event study methodology is applied to identify markets' reactions to the Israeli military operations in the Gaza Strip. [ABSTRACT FROM AUTHOR]

This paper quantifies the roles of ethnicity, gender and location in rural income inequality in Israel. Between 10 and 16% of rural income inequality is explained by the Jewish-Arab divide. Schooling and household size, which are respectively much lower and higher among the rural Arab population, also explain significant fractions of income inequality. Location and gender of the household head explain much smaller fractions. Education-enhancing policies directed at the lower end of the schooling distribution, and at Arab municipalities in particular, are recommended to reduce per capita income inequality in rural Israel and narrow the Jewish-Arab gap. This could contribute to reducing the tension between the Jewish majority and the Arab minority in Israel, and to creating a better atmosphere for their neighborly coexistence. [ABSTRACT FROM AUTHOR]

This paper estimates a structural vector autoregression to assess the empirical effects of terrorism on output and prices in Israel. Long-run restrictions are used to interpret the effects in terms of aggregate demand and supply curves. The responses indicate that the immediate effects of terrorism are similar to those associated with a negative demand shock. Such a leftward shift of the aggregate demand curve is consistent with the existence of adverse effects on most components of aggregate expenditure documented in previous empirical studies. The long-term consequences of terrorism are similar to those related to a negative supply shock. Such a leftward shift of the long-run aggregate supply curve agrees with adverse effects on the determinants of the potential output, such as contractions of physical capital highlighted in earlier work, as well as reductions of technological innovations and slowdowns of net immigrations, which have not been fully analyzed in the existing empirical literature. [ABSTRACT FROM AUTHOR]

This paper revisits the defence-growth nexus for the rivals of the Israeli-Arab conflict over the last four decades. To this end, we utilize the Toda and Yamamoto (1995) causality test and the generalized variance decomposition. Contrary to the conventional wisdom and many earlier studies, we fail to detect any persistent adverse impact of military expenditures on economic growth. Our conclusions are kept intact even when we account for the possibility of endogenous structural breaks and during the post-1979 peace treaty period. Our findings imply insignificant peace dividends once the conflict is resolved and the military spending is cut to internationally acceptable standards. [ABSTRACT FROM AUTHOR]

This paper models the interactions between the defense industry market structure and the defense needs of Israel, the USA and Western Europe, which produce several heterogeneous defense goods. The model specifies that the defense industries of the US and Europe are ‘large’ while that of Israel is ‘small’. The US military aid to Israel is also an integral part of the model. The results show that net defense costs of Israel are minimal when the number of its defense firms is one. The model predicts that an increase in US military aid reduces Israel’s government expenditure, its defense industry’s profits and its net defense costs. [ABSTRACT FROM AUTHOR]