The labor market impact of mobility restrictions: Evidence from the West Bank

Using data on Israeli closures inside the West Bank, we provide novel evidence on the labor 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 labor market conditions. Check-points have a significant negative effect on employment, wages and days worked, while other barriers have small positive effects on employment and no discernible effects on other variables. We provide evidence that only a very small portion of these effects is due to direct restrictions on the mobility of workers. According to our estimates the labor market costs of the barriers amounted in 2007 to between 4% and 4.4% of GDP.