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How Trade Can Affect Conflict
Figure 1.9 Palestinians Killed by Israel in the West Bank and Gaza, 2000–04 Number of deaths 700 600 500 400 300 200 100 0 2000
2001
2002 West Bank
2003
2004
Gaza
Source: B’tselem.
infrastructure, and the region (West Bank, Jerusalem, or Gaza).40 An increase of $10 million in the export revenue variable reduces conflict-related fatalities in that locality by 2.1 percent, significant at the 1 percent level (column 1 of table B.15).41 Given the weighting scheme for the export variable, this effect reflects the conflict-reducing impact of exports via employment. Adding economic controls, including permits to work in Israel and the unemployment rate, as well as the Palestinian fatalities prior to the Second Intifada (1995–2000), slightly raises the absolute size of the export coefficient, which remains significant at 1 percent (column 2 of table B.15). These results support the opportunity cost hypothesis: better employment opportunities should raise the opportunity cost of involvement in the conflict, thus lowering its intensity. This result is also in line with experts’ opinion on the determinants of violence in the West Bank in the current phase (Xinhua 2014).42 We next add other labor market indicators from the Palestinian Labor Force Survey (PLFS), including the share of private and public employment in the locality, the share of the locality’s workers who are employed in Israel, and the average wage in 1999 (column 3 of table B.15). Adding these potentially important controls, which capture the pre-Intifada reliance of the localities on different sources of employment, increases the estimated impact of changes in export revenues on the conflict. Now a rise in $10 million in Palestinian exports of a sector covering 10 percent of the locality’s private employment reduces conflict-related fatalities in that locality by 2.8 percent, significant at the 1 percent level. This larger absolute value of the coefficient is entirely due to the reduction in sample size (to 199 localities) caused by the inclusion of the additional labor market controls.43 This smaller sample size provides a Trading Away from Conflict • http://dx.doi.org/10.1596/978-1-4648-0308-6