Road Closure Obstacles and Palestinian Economic Growth A Market Access Approach
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Road Closure Obstacles and Palestinian Economic Growth A Market Access Approach Roy van der Weide Bob Rijkers Brian Blankespoor Alexei Abrahams ABCDE Conference June 21, 2021 1 / 19
How valuable is market access? I Hard to assess: Market access generally evolves slowly and non-randomly I Existing studies exploit variation in: I Provision of transportation infrastructure (e.g. Akerman, 2012; Banerjee et al., 2012; Baum-Snow et al., 2013; Donaldson, 2016; Faber, 2014; Jedwab and Moradi, 2014) I Placement of borders (e.g. Redding and Sturm, 2008; Brulhart et al., 2012) I Transportation costs (e.g. Storeygard, 2016; Volpe et al., 2014) I Do short-term changes in market access impact economic growth (proxied by night-time-lights (NTL)) in the West Bank? I Exploit variation due to mobility restrictions imposed by Israel 2 / 19
Israel’s Closure Policy I Israel deploys obstacles to mobility inside the West Bank I Checkpoints, trenches, road bloacks, a barrier wall I These serve to protect Israel and Israeli settlements from attacks, not to regulate economic performance ⇒ Exogeneity I Number, intensity and configuration of obstacles changes frequently and unexpectedly ⇒ spatial and temporal variation in market access 4 / 19
Data used I Road network data (incl. travel speeds) - from OCHA I Road closure obstacles data (incl. wait times) - from OCHA I Populated area data (incl. population counts) - from PCBS I Night-time-lights data - from NOAA I Stock price data - from PEX I Fatalities data (both Palestinian and Israeli) - from B’Tselem 5 / 19
Distribution of Travel Times (in minutes) 7 / 19
Measuring market access X MAit = Pjt h(Tijt ), j where I MAit is market access at locality i and time t I h(T ) = T −θ is the “distance function” with distance decay parameter θ I Tijt is the travel time between origin i and destination j (at time t) I Pjt is the population in destination j (at time t) I The set of destinations comprise the governorate capitals 8 / 19
Density of market access (θ = 3) .3 .2 density .1 0 -2 0 2 4 ln market access 2007 2008 2009 2010 9 / 19
Market access by locality: 2006 (left) versus 2010 (right) 10 / 19
Night Time Lights (NTL) - a proxy for economic output Figure: Top-coded (left) vs. bottom-coded (right) Night Time Lights (2006) 11 / 19
NTL versus GDP 2.4 2.2 ln(output) 2 1.8 2000 2002 2004 2006 2008 2010 Year ln(GDP) ln(NTL) 12 / 19
Main empirical specification ln Yit = β ln MAit + γXit + λi + δt + εit , where: I Yit : NTL per capita at location i and time t I Xit : ln fatalities (within 5km radius) I λi : locality fixed effects I δt : time fixed effects 13 / 19
Identification I OLS estimates of β may be biased I complementary penalties ⇒ positive bias I fixed checkpoints being replaced by flying checkpoints (not captured in our database) ⇒ negative bias I measurement error in MA ⇒ negative bias I Instrument number of checkpoints located in a radius between 10 and 25 km from the locality I Correlated with MA, but orthogonal to local conditions 14 / 19
First stage 15 / 19
Main results 16 / 19
Difference-in-Difference Regressions 2006-2010 17 / 19
Counterfactual growth upon removing all obstacles .4 log difference in NTL per capita .25 .2.3 .35 2004 2006 2008 2010 2012 year θ=1 θ=2 θ=3 θ=4 θ=5 θ=6 18 / 19
Conclusion I Exploiting quasi-experimental variation in market access generated by the deployment of Israeli army obstacles this paper demonstrates that short-run fluctuations in market access impact local economic performance. I Israel’s closure policy reduced GDP per capita in the West Bank between 6.0% and 7.5% each year between 2006 and 2012 I Preliminary estimates obtained using firm-census data suggests that changes in market access primarily impact the manufacturing sector 19 / 19
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