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

Yusaku Horiuchi and Asher Mayerson

Political Science Research and Methods, 2015, vol. 3, issue 3, 609-618

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.

Date: 2015
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