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.