Working Paper
Economic Aspects of the Palestinian-Israeli Conflict

Since October 2000 Israel and the Palestinians of the West Bank and Gaza Strip have become entangled in a bloody confrontation. This paper focuses on the economic relationship between the Israeli economy and the Palestinian economy of the West Bank and Gaza Strip, and the ways in which this has contributed to the collapse of the Oslo Accord. The paper finds that Israeli policies have distorted and weakened the Palestinian economy, particularly in the areas of trade (dependence upon one major trade partner), taxation (loss of revenues to finance development spending) as well as in the labour market (controls on flows of workers) and in Palestinian access to land (including land confiscation). As a result, poverty and unemployment have risen in the West Bank and Gaza Strip. Resolution of these economic problems is therefore crucial to building a durable peace.