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Long-Term Policy Options for the Palestinian Economy

AGRICULTURE ANTICOMPETITIVE PRACTICES AUTONOMY BORDER POLICY BUSINESS ENVIRONMENT CAPITAL ACCUMULATION COMMON MARKET COMPETITIVENESS CONSUMER PRICE INDEX CONSUMERS COST SAVINGS CPI CURRENCY CUSTOMS CUSTOMS UNION DISPUTE SETTLEMENT DISPUTE SETTLEMENT MECHANISMS DOMESTIC DEMAND DOMESTIC ECONOMY DOMESTIC LABOR DOMESTIC LABOR MARKET ECONOMIC ACTIVITY ECONOMIC COOPERATION ECONOMIC CRISIS ECONOMIC DEVELOPMENT ECONOMIC FACTORS ECONOMIC GROWTH ECONOMIC OBJECTIVES ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC RELATIONS ECONOMICS EQUILIBRIUM EQUILIBRIUM MODEL EXOGENOUS SHOCK EXPORT MARKETS EXPORT SECTORS EXPORTERS EXPORTS EXTERNAL SHOCKS EXTERNAL TARIFF FACTOR ACCUMULATION FINAL GOODS FOREIGN BANKS FOREIGN INVESTMENT FOREIGN WORKERS FREE TRADE FREE TRADE AGREEMENT FREE TRADE AREA GDP PER CAPITA GROSS DOMESTIC PRODUCT GROWTH MODEL GROWTH POLICY GROWTH POTENTIAL HIGH UNEMPLOYMENT HUMAN CAPITAL IMPORT PRICES IMPORTED INPUTS IMPORTS INCOME INCOME CONVERGENCE INTELLECTUAL PROPERTY INTELLECTUAL PROPERTY RIGHTS INTERNATIONAL FINANCE LABOR FORCE LABOR FORCE GROWTH LABOR MARKET LABOR MARKET INTEGRATION LABOR MARKET OUTCOMES LABOR MARKET SEGMENTATION LABOR MARKETS LABOR MOBILITY LABOR POLICIES LABOR SERVICES LABOR SUPPLY LEGAL INSTITUTIONS MARKET INTEGRATION MARKET OUTCOMES MARKET SEGMENTATION NATIONAL INCOME OPEN BORDERS PER CAPITA INCOME POLICY ENVIRONMENT POPULATION GROWTH PREFERENTIAL ACCESS PRIVATE INVESTMENT PRIVATE SECTOR PRODUCERS PRODUCTION COSTS PRODUCTIVITY PRODUCTIVITY GROWTH PROPERTY RIGHTS PUBLIC SERVICES REAL GDP REAL INCOME REDUCING TRANSACTIONS COSTS REGULATORY FRAMEWORK RISK PREMIUM RULES OF ORIGIN SERVICE DELIVERY SPECIALIZATION STRUCTURAL UNEMPLOYMENT TAX REVENUE TAX REVENUES TECHNOLOGY TRANSFER TOTAL FACTOR PRODUCTIVITY TRADE DEFICIT TRADE DEFLECTION TRADE DIVERSION TRADE LIBERALIZATION TRADE PARTNER TRADE POLICY TRADE REGIME TRADE REGIMES TRADE RULES TRADE VOLUMES TRANSACTIONS COSTS TRANSPORT COSTS UNEMPLOYMENT UNEMPLOYMENT RATE VALUE ADDED WAGE GAP WAGES WELFARE LOSS WELFARE LOSSES WORLD TRADE WORLD TRADE ORGANIZATION WTO ECONOMIC POLICY & PLANNING ECONOMIC POLICY POLITICAL ASPECTS POLICY MAKING CONFLICT AREAS ECONOMIC DEPENDENCY DISPUTE SETTLEMENT DISPUTED TERRITORIES TECHNOLOGY TRANSFER POLITICAL RISKS SECURITY MEASURES TRANSACTION COSTS LEGAL FRAMEWORK REGULATORY REGULATORY ENVIRONMENTS FINANCIAL INSTITUTIONS POLICY FRAMEWORK TRADE POLICY LABOR MOBILITY BUSINESS ENVIRONMENT PUBLIC-PRIVATE PARTNERSHIPS ECONOMIC GROWTH CUSTOMS UNIONS VALUE ADDED TAXES ACCESS TO MARKETS TRADE LIBERALIZATION LABOR FORCE CHARACTERISTICS ECONOMIC INTEGRATION AUTONOMY & INDEPENDENCE MOVEMENTS PEACE AGREEMENTS PEACE BUILDING UNCERTAINTY SOCIAL COSTS
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Washington, DC
Middle East and North Africa | West Bank and Gaza
2013-08-21T20:51:29Z | 2013-08-21T20:51:29Z | 2002-07

In light of deteriorating economic relations between Israel and the West Bank and Gaza, and suspended peace negotiations, it is timely at this juncture between the lapsed Interim Period and a final status agreement to examine past experience with a view to assessing the policy choices facing Palestinian policymakers in the future. The post-Oslo experience points to failed economic normalization and income convergence with Israel. Several reasons for these failures have been advanced, including poor implementation of the Paris Protocol, as well as fundamental flaws inherent to the protocol itself. The experience under the Paris Protocol illustrates the degree to which political and economic factors are intertwined; both types of factors need to be addressed in a comprehensive framework. The fact that political pressures from Israeli security concerns introduced severe economic hardship on the Palestinians and threatened newly-gained Palestinian autonomy contributed to the unraveling of the interim agreement. The economic environment of uncertainty, risk, costly transactions, and inadequate legal, regulatory and financial institutions hampered private sector development and especially Palestinian-Israeli partnerships and business networks at the firm level, effectively weakening an important tie that holds civil society together. These factors further undermined Palestinian economic growth, laying the foundation for political crisis and civil conflict. Given the problems associated with the existing policy framework, this analysis examines alternative policy options that will face Palestinian policymakers in the event of a peace agreement with Israel. These future policy choices relate to trade, labor mobility to Israel, and the business environment and associated public-private interactions. In a first stage, each policy area is analyzed separately, that is, in a partial equilibrium context independent of the others without accounting for broader intersectoral relationships. In a second stage, the analysis brings together these separate areas into an integrated framework. A range of assumptions vis-e-vis the nature of borders between West Bank and Gaza and Israel is delineated, tying together the trade, labor and private sector development considerations to measure their combined impact on growth prospects. The analysis develops scenarios to reflect different combinations of future policy options linked to the nature of borders with Israel. This simulation exercise illustrates the relative merits of each scenario, the associated trade-offs, and the prospects for economic growth in the event of a peace agreement and a completion of final status negotiations.

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