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The Opportunity Cost of Conflict: Statistically Comparing Israel and Synthetic Israel

  • Yusaku Horiuchi and Asher Mayerson

Abstract

What would Israel’s economy have looked like without the 2000 Palestinian Intifada? This article examines this counterfactual question by statistically comparing the economic growth trajectories of Israel and a “synthetic” Israel, which is constructed by applying a method proposed by Abadie and Gardeazabal (2003) and Abadie, Diamond and Hainmueller (2010, 2014). The results of the analysis suggest that Israel’s per capita gross domestic product during the Second Intifada was reduced by an average of about $2,003 per year (in 2005 US dollars). This amounts to about 8.6 percent of the 2000 baseline level. In the case of the Second Intifada, the opportunity cost of conflict was indeed substantial and significant.

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Associate Professor of Government and Mitsui Chair in the Study of Japan (email: Yusaku.Horiuchi@dartmouth.edu); Class of 2015, Dartmouth College (email: Asher.J.Mayerson.15@dartmouth.edu). Earlier drafts were presented at Keio University (Tokyo, Japan) on 11 July 2014 and at the Australian National University (Canberra, Australia) on 24 July 2014. We thank Bernard Avishai, Craig Bond, Jeff Friedman, Ippei Fujiwara, Colin McKenzie and Masao Ogaki for their comments and suggestions. The order of authors is alphabetical and does not reflect relative contribution. Online appendices are available at http://dx.doi.org/10.1017/psrm.2014.47.

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The Opportunity Cost of Conflict: Statistically Comparing Israel and Synthetic Israel

  • Yusaku Horiuchi and Asher Mayerson

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