RAND Researchers Analyze the Costs of the Israeli-Palestinian Conflict | Web version

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June 8, 2015

International Affairs

The Costs of the Israeli-Palestinian Conflict

RAND researchers analyze the economic costs and consequences

A section of the Israeli barrier cuts beneath the West Bank refugee camp of Shuafat, October 31, 2014

Photo by Finbarr O'Reilly/Reuters

When examining the conflict between Israelis and Palestinians, it is common to focus primarily on the political implications of the lack of peace. The economic cost of the conflict is often overlooked. Recently, RAND experts analyzed how both economies are harmed by the lack of a two-state solution and found that a significant peace dividend could be achieved if the conflict could be resolved.

In a study released today, a team of RAND researchers led by C. Ross Anthony and Charles Ries estimates that the Israeli economy stands to gain more than $120 billion over the next decade should the long-standing conflict between Israelis and Palestinians end and a two-state solution emerge. The Palestinian economy could expand by $50 billion, with per average per-capita income rising by 35 percent.

Conversely, a return to violence would profoundly harm both economies, with Israel missing out on a potential $250 billion in economic activity. The Palestinians could see their per-capita gross domestic product shrink by up to 45 percent.

The study also examined three other scenarios: a coordinated unilateral withdrawal from the West Bank by Israel, an uncoordinated withdrawal in which Palestinians do not cooperate with Israel's unilateral moves, and nonviolent resistance by the Palestinians. A coordinated withdrawal would yield an $8 billion benefit for the Palestinians and would have a negligible impact on Israelis. The other two scenarios would result in economic losses for both sides.

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