o Time : April 20, Friday 12:00 ~ 2:00 p.m.

o Venue : 9705(The 7th floor seminar room)


PROMOTING INTER-REGIONAL COOPERATION BETWEEN ISRAEL AND PALESTINE: A STRUCTURAL PATH ANALYSIS APPROACH


Abstract

To secure peace and prosperity in the Middle East, it is becoming increasingly important to be able to measure the extent of the interdependencies between bordering yet often politically-disconnected nations. In this paper, I have taken the first step in the development of an ‘Economic Road Map’ to promote cooperation between Israel and Palestine. The main idea is that inter-regional trade based on free-market principles represents a mutually-beneficial interaction, without which the regions involved would not have voluntarily engaged in an exchange. To quantify the extent of bi-regional economic interdependencies between Israel and Palestine, I employ the framework of input-output (I-O) models and structural path analysis (SPA). I examine various scenarios concerning the trading relationships between the two economies, ranging from (i) complete separation (the ‘autarky’ case) to (ii) perfect integration (two nations, one unified market). I found that free trade with minimal border controls (perfect integration) generates the largest multiplier impact, and discuss the policy implications as well as the directions for further research. (JEL R12, R15, C67)