The Economic Foundation for Peace in Israel and Palestine

The Israeli–Palestinian conflict is, at least as much as anything else, a clash between the haves and the have-nots.

Long before Hamas massacred civilians and took Israeli hostages on October 7, before Israel laid waste to Gaza in retaliation and ramped up its attacks on Palestinians in the West Bank, startling economic statistics told a story of inequity—one that would have caused catastrophic tensions in any society.

The rawest of these numbers was the gap in the size of the economies. Even in 2022, before the current war, GDP per capita in Israel was some fourteen times higher than that in Gaza and the West Bank. The disparities repeated across a variety of economic and development indicators: the unemployment rate (24.4 percent versus 3.7 percent); maternal mortality (six times higher in the West Bank and Gaza); life expectancy (six years longer in Israel); tertiary education attainment (65 percent higher in Israel)—to name a few.¹

Many of these gaps have, of course, become yawning canyons as the current war rages on, though the toll to the Palestinian economy and human development is only starting to come into focus (for example, a study in the Lancet has estimated that, since October 2023, the life expectancy in Gaza has dropped from 76 to 41 years).²

This report argues that the economic inequity at the heart of the Israeli–Palestinian conflict must be addressed as part of any long-term plan for peace and reconstruction. Distant as an end to the war may seem, policymakers—international, Israeli, and Palestinian—would do well to begin planning for equitable economic rehabilitation that breaks the vicious cycles of donor waste, inequality, insurgency, and counterinsurgency. While the economic problems cannot be solved without a political settlement, the inverse is also true.

Policymakers seeking an Israeli–Palestinian political agreement must develop an economic vision to undergird any solution intended to last. Just as the war is forcing an overhaul of old political frameworks for conflict resolution, a new economic vision is also needed. This economic vision and policy should be built on three main objectives: short-term recovery that leads to sustainable, long-term growth; treating Palestinian economic development as a pillar of political stability; and reducing deep economic inequality between Israelis and Palestinians.

Specific policies to advance these aims will require Israel to relinquish numerous technical, bureaucratic, and physical forms of economic control. International actors with leverage can push Israel to make incremental changes that are less politically sensitive than core conflict issues—given Israel’s ultranationalist, anti-Palestinian public discourse—but which can open economic horizons for Palestinians in the short and medium term. 

The aims above suggest a set of principles for crafting policies to support Palestinian economic prospects: 

• Economic equity is a requirement for long-term peace.
• Isolation and segregation are the enemies of economic vitality.³
• Security and Palestinian economic growth are complementary, not zero-sum.
• Economic growth without Palestinian self-determination can only lead to the resurgence of conflict.

This report is organized into three parts. The first assesses the war’s economic toll on both Palestinians and Israelis. The second analyzes the historical failures of economic peace paradigms and the flawed assumption that economic growth alone can produce peace. The final section outlines a new economic framework centered on reducing inequality, fostering cooperation, and anchoring economic strategy within a durable two-state political solution.

Israel and its international allies can ignore these aims and principles—but only to a point. The current Israeli government has a vision of a permanent military or civilian authoritarian regime in Gaza and the West Bank, which it could use to establish iron-fisted stability and even economic growth. But such a situation is likely to quickly descend into permanent insurgency and counterinsurgency—destroying both political stability and economic growth. And even if prosperity-by-force somehow worked, anyone who cares for democracy and rights should be searching for another way. 

1. Wartime Economic Emergency 

The war and repression that followed the attacks of October 7 have pushed a teetering Palestinian economy over the brink and into collapse, especially in Gaza. 

The World Bank estimated in February 2024 that Gaza’s GDP shrunk more than 80 percent in just the first few months of the war.⁴ A year later, the Bank estimated that the cumulative loss to GDP had reached almost 86 percent; that 98 percent of Gaza’s population was living in “multidimensional poverty” (up from 64 percent before the war); and that 80 percent of the workforce was unemployed (up from 45 percent before the war).⁵ The Bank reckons that rehabilitating Gaza will cost some $53 billion—a sum that, huge as it is, only hints at the difficulty of reconstruction, considering the political challenges to achieving peace and international cooperation for rebuilding.⁶

Although often overshadowed by the desperate situation in Gaza, the West Bank has suffered sharp economic decline as well. At the start of the war, Israel almost immediately implemented two policies that would wreak havoc on both the Palestinian Authority (or PA, which governs the West Bank) and Palestinians: First, the Israeli government immediately banned entry for the roughly 150,000 Palestinian laborers who worked legally in Israel with security-vetted work permits. Second, the Israeli government also stopped transferring the clearance taxes designated for administration for Gaza, which it has collected for the PA ever since the Oslo Accords of the mid-1990s. This one-two punch canceled the income of the families who depended on the laborers and slashed tax revenue to the PA. Israel touted the measures as necessary for security, which was not credible—permit-holding laborers have almost never attacked Israelis.⁷

These measures set in motion a destructive economic domino effect. When Israel decided to withhold some of the clearance taxes, the PA rejected the transfer of all funds, eliminating up to 65 percent of its revenue.⁸ The PA in turn was forced to slash salaries of public employees, by a third to a half.⁹ Extensive new movement restrictions during the war, including physical gates locking residents into major cities or choking them into lone Israeli checkpoints open at arbitrary times, have caused further job loss in the West Bank itself: Since the start of the war, 40,000 people have lost jobs in commerce, services, industry, and hospitality and tourism, representing about 20 percent of the workforce in those fields.¹⁰ Most recently, another 40,000 Palestinians have been displaced from the area of Jenin and Tulkarm, where the Israeli Defense Forces have been conducting a major military incursion since January.¹¹

Caption: Palestinian laborers line up to cross an Israeli checkpoint as they return to their homes after a day’s work in Israel on January 3, 2010, near the village of Ni’ilin in the West Bank. Source: David Silverman/Getty Images

Bad for Israel, Too

The Palestinian situation is hardly comparable to Israel’s far stronger economy; but the war has also harmed Israel. Before the war, Israel enjoyed a robust and advanced economy that was globally integrated and fairly resilient to international or domestic shocks. Despite the COVID-19 crisis, five years of political turmoil, and social upheaval in 2023 due to a political assault on judicial independence, the economy remained relatively strong. 

But by January 2024, the total cost of the war, including interest payments, compensation and civilian needs, and loss of income and revenue, was estimated at NIS 215 billion (approximately $57 billion at the time).¹² Several months later, in May 2024, the governor of the Bank of Israel projected that the cost would rise to NIS 250 billion by 2025, and in May of this year, Israel’s finance minister stated that the cost of the war was “above” this figure.¹³ Israel’s budget deficit ballooned from 1.5 percent of GDP in 2023, reaching 7.7 percent during the twelve months from December 2023 to November 2024.¹⁴ In 2024, the economy grew just 0.9 percent.¹⁵ Even with growth projected to pick up again in 2025, finance ministry officials predict the budget deficit could reach 4.9 percent this year—again breaching the government’s target of 4.4 percent.¹⁶

There’s a cost to Israel’s surging military spending: public sector salaries have been cut 3.3 percent across the board in 2025.

Israel’s spending on the military has surged as well, accounting for about 20 percent of government spending in 2025.¹⁷ This figure is up from over 12 percent of government spending on defense in 2021, which even then was the seventeenth-highest level of military spending in the world—higher than the United States, India, and the UK.¹⁸ While economists debate the economic effects of high military expenditures, military spending of this size has already led to revised budget priorities, such as a 3.3 percent salary cut across the board for the public sector, leading to strikes among teachers and medical personnel. The government has explicitly justified the cuts as necessary to finance the war.¹⁹

Israel’s debt-to-GDP ratio is predicted to soon exceed 70 percent.²⁰ Both Fitch and Moody’s lowered Israel’s credit rating in 2024, the latter more than once.²¹ Although the IMF predicts that Israel’s economy will grow at a somewhat faster clip in 2025, there are many grave uncertainties, and a survey from February by the Israel Democracy Institute found that just one-third of Israelis are optimistic about the country’s economic future.²²

The war has harmed the Israeli economy in a variety of other ways, both direct and indirect. Limitations on Palestinians’ freedoms also harm Israeli industries. For example, the loss of Palestinian laborers has forced Israel to raise the quota for foreign workers—who require costly housing and social services, and lack language skills and local familiarity.²³ The shortage of construction workers has contributed to surging housing costs in Israel.²⁴ Meanwhile, Israel’s tourism is struggling because of caution about visiting a conflict zone.²⁵ There was also a sharp decline in the net number of businesses of all kinds in the first year of war, with tens of thousands of Israeli firms shuttering.²⁶

Other sectors of the Israeli economy have also suffered. Israel’s high-tech industry is responsible for about 20 percent of the country’s GDP, primarily driven by salaries of high-tech employees. This sector has faced specific challenges, including the high burden on Israeli military reservists leading to loss of human resources, concern among investors, and a global slowdown prior to the war.²⁷ In April 2024, the Israel Innovation Authority reported that as many as 8,300 high-tech employees had left the country for relocation since the war began—following an initial rise of emigration from this sector in 2023 due to the government’s assault on the judiciary and democracy.²⁸ In 2022, the high-tech industry added nearly 36,000 jobs; this declined sharply in 2023, and in 2024 the industry lost nearly 5,000 jobs.²⁹

Despite these pressures, Israel’s economy is not verging on collapse. Israel was able to absorb the global financial crisis of 2008 fairly well, the COVID-19 pandemic, and the domestic political instability since 2019. Israel has seen substantial growth in military exports, another key industry.³⁰ Ironically, however, Israel’s economy could be harmed just enough to create stifling burdens for its citizens, even as its macroeconomic data remain fairly robust. 

Surging Inequality

The third and critical impact of the war is the ever-widening economic chasm between the two sides. The Israeli economy was vastly larger and stronger than the Palestinian economy prior to the war, and the divide has grown deeper than ever. 

As noted above, in 2022, Israel’s GDP per capita was fourteen times that of the West Bank and Gaza—some $54,900 at current prices, compared to $3,800.³¹ This gap has held steady for decades, since at least the time of the Oslo Accords. But during the war, as the Palestinian economy shriveled, the gap has severely worsened. The International Labour Organization (ILO) estimates that the GDP per capita of the West Bank and Gaza was 33.4 percent lower in the first twelve months of the war (October 2023–September 2024) as compared to the previous twelve months. Much of this pain was absorbed by Gaza, whose economy contracted 85 percent during the period, and which now has a GDP per capita almost 95 percent lower than the West Bank’s, according to the ILO.³² But the West Bank’s economy also contracted almost 22 percent. In contrast, the IMF estimates that, during 2024, Israel’s GDP per capita, adjusted for purchasing power, declined by only half a percent, despite the economic disruptions of the war.³³

Figure 1

One difficulty of discussing inequality in Israel and Palestine is that, despite their geographical proximity and the integration of their economies, they are rarely assessed as a single economic entity. But separate analysis of the two sides reflects a political-analytic framework of completely separate societies, which doesn’t reflect the reality of their deep interdependence. For example, inequality in Israel and the Palestinian territories is not particularly striking when they are analyzed separately. The World Bank’s Gini coefficient for Israel in 2016 (the most recent comparable data) was 39—on the higher end of OECD countries, but only a little above that of the West Bank and Gaza (34), and lower than that of the United States (41).³⁴ But when Israel and the Palestinian territories were assessed as a single population by independent economists, the Gini was a shocking 61, the second-highest in the world, behind only South Africa.³⁵ Postwar Gini data aren’t available yet, but with Palestinian incomes having cratered in the last year and a half, it stands to reason that the combined Gini for Israel and Palestine is now even higher. 

In sum, the economic effect of the war on Palestinians is catastrophic, and exponentially worse in Gaza. Any reconstruction in the Strip and rehabilitation of the Palestinian economy will require massive, long-term investment that will only work alongside long-term political stabilization. 

For Israel, the war represents a significant financial strain falling largely on the middle class, business owners, consumers, and taxpayers. The cost is felt through a slow grind that affects Israel’s long-term macroeconomic prospects and its global position as a strong place for investors, which in turn threaten the growth of certain major engines of the Israeli economy, particularly its high-tech and innovation sector. Tax burdens, inflation, rising housing costs, and reserve-duty-related loss of income will grow as the war continues, and especially if the current government continues on its trajectory of annexation of both the West Bank and Gaza. (And the government made its aims in Gaza even more explicit in May, moving precisely in this direction.)³⁶

To the degree that these two societies suffer economically from war and conflict, only political stabilization can help. Yet the past is littered with the failure of peace efforts; any future political framework for conflict resolution must overhaul policy paradigms of the past, and the prior assumptions informing the future. 

This analysis proposes that failed economic assumptions and practices formed part of the overall political failures of the peace processes of earlier decades. If those same economic principles are woven into future peace-oriented policies, the economic factor will continue to undermine or even sabotage efforts at stabilization, and drive future escalations. The next section reviews the broad economic thinking that characterizes various phases of Israeli–Palestinian relations in recent decades, from the 1990s, the start of the “peace process,” through to the present. 

2. Failed Paradigms for the Economy and Peace

Each phase of the last several decades of Israeli policy was grounded in misguided—and ultimately failed—thinking about peace and conflict with the Palestinians, economic life, and political progress.

The Oslo Paradox (late 1980s–2008)

Economics has always been relevant to Israeli–Palestinian negotiations—though often not in ways that have made headlines. The Oslo process that began in the early 1990s was, in part, built on a belief in Israeli business and economics circles—founded on the increasingly popular theories of liberalization and major restructuring of the Israeli economy from the mid-1980s—that prosperity could never truly flourish without Israel’s full global and regional economic integration, and that peace would be necessary to achieve both. Israel was able to achieve its aims, however, while the peace process foundered, and the Palestinian economy, by many measures, suffered from the start with the implementation of the Oslo Accords during the 1990s. The material decline of standards of living during the Oslo years is one of the underappreciated factors contributing to Palestinian disillusionment with the Oslo process. Economic inequality between Israel and the Palestinians grew and Palestinian economic life deteriorated, in part as a direct result of the new geopolitical arrangements. The combination soured Palestinians on peace in ways that were all but invisible to Israelis. 

In the late 1980s, Israel was undertaking a phase of liberalization of its state institutions, economy, and even its social norms. The country was methodically dismantling the heavily state-controlled economy of its early decades and moving decisively toward a more globalized economy—deregulating foreign currency and seeking to access global markets. The liberalizing political and economic policies followed trends in the wake of the fall of the Soviet Union and a global wave of liberalization and democratization. In this environment, Israel’s business and political leadership tended to converge around the notion that the conflict with the Palestinians—including what Israel saw as the political, international, and economic albatross of the occupation—had to end in order to fulfill Israel’s global economic potential.³⁷

Transforming Israel into a globalized economy was not the sole factor driving Prime Minister Itzhak Rabin to advance the Oslo process, but it augmented other considerations. Rabin was influenced by the first Palestinian uprising (the Intifada) that began in 1987, from which he drew the conclusion that a permanent occupation of a hostile population of noncitizens was unsustainable. Liberal Israelis, particularly those in the business community, came to believe that the ongoing occupation would create an obstacle or a deadweight on Israel’s wish to fulfill its outward-looking economic potential. Dovish Zionist Israelis increasingly argued that Israel could not be “Jewish (majority) and democratic” if occupation continued and advanced, inexorably, toward annexation of territories where millions of Palestinians lived.³⁸

In the nineties, Israelis in the business community began to oppose the occupation—because they thought it would create an obstacle to Israel’s economic might.

The combination of views present among the Israeli public created an environment ripe for many of Rabin’s ideas, and his Labor Party campaigned on advancing peace during the elections in 1992. In September 1993, Israel and the PLO signed the Declaration of Principles in Washington, which provided a framework for limited, incremental Palestinian self-governance.

However, the political aim of the Oslo process was ambiguous by design. The concept of a Palestinian state was not even mentioned in the accords, much less agreed to, and the newly created Palestinian institutions were designed to have partial, circumscribed, and ambiguous powers—still subject to Israel’s ultimate control for at least five years, after which the two sides were supposed to negotiate final status issues.

Ambiguous Economic Agenda

The economic piece of the Oslo process was no less ambiguous. The Paris Protocol that Israel and Palestinian leaders signed in April 1994 established what might be termed Israel’s umbrella control—widespread power over borders, tax and customs policies, and tax collection on clearance taxes.³⁹ The protocol provided for the establishment of a Palestinian Monetary Authority, and institutions designed, in theory, for Palestinian financial independence. In practice, however, the protocol reinforced Israeli control, and Palestinian financial “dependence by design.”⁴⁰

The political framework was predicated on conditional, incremental increases in Palestinian autonomy accompanied by gradual Israeli redeployment. This approach entailed cutting Palestinian areas into designated segments with varying levels of ongoing Israeli control. Israel placed movement restrictions between the different Palestinian areas, while tightening movement into Israel and establishing movement restrictions between the different areas. Palestinian spoiler violence contributed the immediate impetus for growing movement restrictions in the West Bank, particularly from 1994, after an Israeli massacre of Palestinians in Hebron was followed by a series of Hamas suicide bombings in Israel. After the Hebron massacre, Palestinians in the city were placed under a severe movement curfew, due to fears of revenge attacks. The increased movement restrictions continued in waves over the Oslo years, further hampering social and economic life.⁴¹

By 1995, two years after the Declaration of Principles was signed, the economic results were evident. In September of that year, the UN Committee on Trade and Development (UNCTAD) found that economic benefits to Palestinians had not materialized, standards of living had “fallen sharply,” and the number of Palestinian laborers working in Israel, a vital source of income that accounted for 25–30 percent of the Palestinian GDP, had fallen from 120,000 in 1988 to 30,000 in mid-1995. “The limited empowerment of the PA to date and the delay in the extension of self-rule arrangements have . . . complicated the tasks of economic management and have delayed the process of economic policy reform and restructuring,” UNCTAD wrote. “In addition, the development of institutional mechanisms and regulatory arrangements needed to implement the economic accords has been slow. The challenges of institution-building in a fragmented legal, political and geographical context have been formidable.”⁴²

In 1996, a World Bank assessment found that the average Palestinian family had lost one-third of its income since 1993, and one-third of the workforce was unemployed. Real GDP growth had declined by 10 percent in the first two years of the Oslo process.⁴³

Poor Economics Feed Political Distrust

The economic and political situation in the West Bank and Gaza a few years into the Oslo process fed the deep suspicions of the Palestinian leadership about Israel’s intentions, which might have contributed to its rejection of the Camp David proposals in the year 2000—some Palestinians viewed the ideas on offer as a disguised trap for a situation in which statehood was permanently only partially realized. The talks failed, and the second Intifada led to the most restrictive Israeli policies yet, including Israel’s construction of a security wall in Jerusalem and parts of the West Bank. The wall further damaged economic life by segregating parts of the West Bank from itself, harming agricultural and commercial life, and cutting Jerusalem off from the rest of the West Bank, the city’s “economic hinterland.”⁴⁴

Caption: President Clinton hosts Israeli Prime Minister Barak, left, and Palestinian leader Yasser Arafat, second right, for a working dinner at Camp David on July 15, 2000. Source: Liaison/Getty Images

The other underlying notion of the Oslo Accords—that Israel could not achieve its economic potential in the global arena absent a resolution of the Israeli–Palestinian conflict—also proved wrong. During the 1990s, as Palestinians languished, Israel saw sustained growth in per capita GDP and impressive export growth, which reached an average of 11 percent annually between 1993 and 1997, compared to just 7 percent growth in pre-Oslo years, falling unemployment, rising productivity, and the burgeoning of its high-tech industry.⁴⁵ Foreign direct investment rose from $442 million in 1994 to over $8 billion by the year 2000.⁴⁶ As Oslo floundered, the Israeli economy soared, although escalations such as the Second Intifada in the early 2000s generated setbacks. But overall, Israel’s successful long-term economic trajectory demonstrated that the country had no need for a genuine peace—as a result of Oslo or otherwise—in order to achieve these economic gains.

But Israel’s prosperity didn’t promote peace, either. Violence surged during the 1990s. While the link between economic decline and terrorism is not ironclad, it is plausible. For example, as background to an analysis of the Northern Ireland conflict, researchers found that “youth living in . . . conditions of poverty and inequality are often unemployed or underemployed, leaving them vulnerable to be manipulated and/or recruited by non-state armed groups.”⁴⁷ The growth of inequality and the significant economic decline on one side of the Palestinian–Israeli conflict while the other flourishes might also be an underappreciated factor contributing to escalation. 

The Economic Peace Fallacy (2008–19)

The next two economy-conflict paradigms evolved under Prime Minister Benjamin Netanyahu, beginning just before he returned to power in 2009, and continuing through 2020 to the present. 

The first involves the phrase he articulated in 2008, shortly before being reelected: “economic peace.”

In 2008, Netanyahu floated the notion that peace with the Palestinians should begin on a foundation of economic cooperation, rather than on the divisive and sensitive core conflict issues.⁴⁸ The Oslo years had shown that a peace process could help Israel’s globalizing economy, by bringing political acceptance and investments, even as the Palestinian economy actually foundered. In contrast, Netanyahu’s vision focused on the importance of Palestinian economic growth, which he thought could substitute for resolution of the deeply sensitive core political issues. In a speech in 2008, he said:

It makes no sense at this point to talk about the most contractible issue. It’s Jerusalem or bust, or right of return or bust. That has led to failure and is likely to lead to failure again. . . . We have to strengthen the moderate parts of the Palestinian economy by handing rapid growth in those areas, rapid economic growth that gives a stake for peace for the ordinary Palestinians. . . . Economic development does not solve problems. . . . It mitigates them and makes them more accessible for solutions. . . . Ninety-nine [percent] of our efforts are going to go into political negotiations, and less than 1 percent are going to economic development. I propose we change the proportions. . . . Economic peace will support and bolster the achievement of political settlements down the line.

The speech is worth quoting at length, to understand how Netanyahu eventually replaced a pragmatic-sounding idea about augmenting the peace process with economic development with another notion—that economic development would bring peace and could substitute for political solutions. 

As Netanyahu began his term in 2009, the notion of “economic peace” became central to his political message. In contrast to the idea that peace was needed to achieve Israel’s global economic integration—an animating idea behind the Oslo accords—Netanyahu seemed to realize that he could let the actual peace process trail off indefinitely. Israel’s economy would still flourish. Demonstrating quality-of-life gains to Palestinians helped him make the case that conflict was becoming manageable—foreshadowing the ill-fated “conflict management” approach that emerged later in the decade. 

Netanyahu’s assumption was, to a degree, reasonable: As finance minister from 2003, he had helped complete Israel’s transition to a neoliberal economy, significantly cutting back on state subsidies and social services, nurturing the private sector, and generating momentum in Israel’s global innovation industry, which had already accelerated over the previous decade. In other words, during the Second Intifada—at that time the worst years of the conflict to date—Israel was thriving in achieving its economic aims, which apparently were not conditional on peace. And the years since have proven the resilience of Israeli economic growth, which persisted through several majorly turbulent episodes, ranging from the global financial crisis of 2008, the COVID-19 crisis, a four-year Israeli political crisis, and the mass Israeli protests of 2023. Even the ongoing war, as discussed above, seems to have burdened but not crushed the Israeli economy, which emerged from 2024 still growing. 

Palestine’s Deceptive Economic Growth

The results of Netanyahu’s “economic peace” vision for Palestinians, on the other hand, ranged from ambiguous to destructive.

Netanyahu continued promoting economic peace during the early stage of his second term, which began in March 2009. The political economist Nizan Feldman examined the prime minister’s arguments in a study published in November of that year, and found it “difficult to argue persuasively that increased economic cooperation between Israel and the PA and the creation of conditions conducive to economic growth on the West Bank can pave the road to political peace.” If a focus on economic growth completely replaced political progress, Feldman wrote, it could actually increase “political tension” and hamper Israel’s leeway in negotiations.⁴⁹

Still, at least from an economic perspective, many Palestinians did experience some early benefits during Netanyahu’s second term. The West Bank generated a fair amount of growth during the 2010s, driving the Palestinian economy to expand, on average, 4.21 percent per year from 2009 (when Netanyahu took office) through 2019, prior to the devastating global effects of the COVID-19 pandemic.⁵⁰

Netanyahu boasted of contributing to the growing Palestinian economy, as part of his argument that Israel was stretching out its hand for peace.⁵¹ But as he embarked on the last serious bilateral negotiations for peace in 2013–14, he demonstrated little intention of reaching a final status agreement that would produce a Palestinian state. 

By 2015, Gaza’s GDP per capita was less than half of the GDP per capita in the West Ban.

Meanwhile, the growth of the overall Palestinian economy obscured the vast difference between the West Bank and Gaza. From 2007 onward, after Hamas seized control from Fatah and the Palestinian Authority, Israel maintained a severe closure policy over the territory, easing restrictions slightly in 2010 but ultimately maintaining heavy control over all imports, exports, and movement of people and goods. The economic gaps between Israel and the Palestinian territories were always large, but during this time, another major economic rift emerged between the different segments of Palestinians in the occupied territories. By 2015, Gaza’s GDP per capita was less than half of the GDP per capita in the West Bank.⁵² By 2019, Gaza was reporting 43 percent unemployment, compared to 14 percent in the West Bank.⁵³

Thus, the overall growth of the Palestinian economy disguised many variations and weaknesses across the territories. Further, there was no correlation between that growth and any improvement in the political situation or conflict de-escalation. During Netanyahu’s long rule, the frequency of major armed clashes accelerated—with four rounds of conflict between Israel and Hamas in Gaza between 2009 and 2014, and another significant escalation in 2021, and phases of lower-level violence or smaller operations from approximately 2015 onward. What was left of the peace process completely atrophied following the last American-led negotiations that ended in 2014. Two years later, the first Trump administration set about strengthening Israel’s already powerful position, while alienating the Palestinians and undermining their national aims. 

Economic Insurance against Palestinian Statehood

During this same phase, Israel’s economic growth remained positive, with a 4.02 percent average GDP growth from 2009 to 2019—though unlike Palestine, never registered a calendar year of economic contraction during the period. Unemployment had dropped steadily throughout the decade and reached a forty-year low of approximately 3 percent at the end of 2019, on the eve of the COVID-19 crisis.⁵⁴ Throughout the period, Israel’s GDP per capita remained 10.5 to almost 12 times that of Palestine’s (see chart above).⁵⁵

Before, Palestinian economic growth was supposed to augment the peace process. Now, that growth was supposed to replace a political settlement. But the Israeli economic strategy went even further. The economist Arie Krampf found that during the decade after Netanyahu returned to power in 2009, the prime minister began to develop a novel approach: Israeli economic development was now intended as a bulwark, or an insurance policy against any future global pressure to end the occupation.⁵⁶ Eventually, a thriving and diverse Israeli economy would allow the country to fend off any external pressure to reach peace, such as international boycotts. 

Netanyahu’s approach was considerably successful at staving off a peace agreement. Yet if the policies were intended to provide stability or conflict de-escalation (known commonly in the region as “conflict management”), they were a failure. The regular pace of wars accelerated from 2009, relative to previous decades, and a low level of ongoing violence between wars was felt by all—even before the current war.

But it was precisely Israel’s comfortable and confident economic position, in addition to the expansion of its foreign relations, that led to the next paradigm regarding economics and peace—a prelude to the greatest failure of all. 

The Abrahamic Deflection (2020–23)

After years of facing no significant international pressure for a peace process, in 2016 Trump took the White House and Israel gained perhaps the most stalwart, paradigm-shattering American presidential backer it has ever had. With Trump’s support, in 2020, Netanyahu was able to craft the Abraham Accords—an unprecedented set of agreements with Arab countries. The most important was diplomatic normalization with the United Arab Emirates, which opened avenues of exchange for security, intelligence, the economy, and tourism. The two sides talked about the opportunities that could be afforded for advancing the Israeli–Palestinian peace—or, more accurately, the Emirati side mentioned it in a pro forma way during the signing ceremony. But Israeli–Palestinian peace was never the real focus.

Israel’s confidence that it could expand its relations eastward, breaking the Middle Eastern taboo of erstwhile boycott due to the occupation, was largely grounded in its economic confidence and ambitions.

The deeper political message of the Abraham Accords was that the Palestinians had been sidelined by history. Israel felt it could achieve its principal aims—expanding its economic prospects and its diplomatic and military reach—while simply walking around the Palestinians and permanently denying Palestinian self-determination.

For three years, the Israeli bet on this paradigm appeared to pay off. By 2023, Saudi Arabia seemed poised to normalize relations with Israel in the last year of the Biden administration. Israel presumed that the political conflict could simmer unresolved for an unlimited period of time, as the erstwhile premise that an Israeli–Palestinian peace agreement was necessary in order to achieve Israel’s Middle Eastern normalization grew less and less relevant.

Palestinians, however, rejected the new and emerging geopolitics of the Middle East. Perhaps they could have taken advantage of the Abraham Accords to pursue trilateral projects between the Gulf states and Israel, but to the Palestinian Authority leadership, to do so was seen as accepting their status as a permanently subjugated people with no prospects for independence.

The Palestinian Authority, therefore, signaled its rejection by refusing to participate even in the byproduct opportunities that the emerging normalizations could have offered. Hamas had a different strategy for sabotaging normalization; its October 7 attack on Israel shattered the whole short-lived paradigm of normalization instead of resolution—something Hamas explicitly cited as a reason for its attack. Israel’s crushing losses in that attack and the ensuing war destroyed the larger paradigm that had become entrenched in previous years, which held that the conflict could be managed in perpetuity, and never resolved through Palestinian self-determination. There had been a belief that Israel could permanently politically marginalize and control Palestinians, while expanding its political and economic power and implementing de facto or even de jure annexation of the West Bank, and that potential crumbs of investment in Palestinian infrastructure and economy could buy stability. In the fall of 2023, that belief collapsed. Indeed, this paradigm generated the most colossal failure of all.

Caption: A wall divides the Palestinian West Bank territory (top) and an Israeli settlement (below wall) on November 4, 2023, in al-Ram in the West Bank. Source: Dan Kitwood/Getty Images

To be sure, the economic situation of Palestinians is not the sole or direct cause of the bloodiest war in over a century of conflict. But it is an under-noticed exacerbating factor, feeding into far deeper grievances. As a result, small, isolated gestures such as increasing the number of permits for workers from Gaza to 20,000 (as the “change government” of Israel did during its brief term from 2021 to 2022), stood no chance of holding back the volcanic eruption of violence on October 7, which was largely borne of national, political, economic, and social despair—an incubator for fundamentalism and extreme violence.

3. A New Peace Paradigm Rooted in Equality

Socioeconomic inequality that overlaps with identity-based groups—such ethno-national, political, religious communities—is a known driver of conflict. Inequality is rarely the sole cause of strife, but it too acts as an exacerbating, contributing factor. Over roughly the last two decades, the relationship between inequality and conflict around the world has been well established through empirical data and affirmed in literature reviews.⁵⁷ The realization that inequality between groups—what has become known as “horizontal inequality”—drives conflict may seem intuitive. But the hypothesis that group inequality mattered emerged only after years of empirical research failed to prove a decisive correlation between individual-level inequality and conflict escalation.⁵⁸

Further, while the empirical literature repeatedly reaffirms the link between socioeconomic gaps and conflict, the correlation holds for social, political, and cultural inequalities, as well. Frances Stewart, who coined the term “horizontal inequality,” noted in 2010 that political inequalities are the most likely type to instigate rebellion, but that any of these types can drive conflict escalation. There is also evidence linking the severity of inequality and the intensity of conflict, including economic inequalities within each group contributing to further conflict-related violence.⁵⁹

Israelis and Palestinians therefore display each possible type of inequality, in severe forms. Most obviously, Israel is a recognized, sovereign state with broad military, economic, and political power, while Palestine is only partly recognized and holds hardly any empirical forms of sovereignty in practice. The analysis in the first sections of this report has already demonstrated the historic and deepening economic inequalities.

While such asymmetries are an obvious feature of the conflict, inequality is often overlooked when the conflict is framed purely as a matter of competing land claims or religious animosities. Yet for the most part, peace negotiations and policy paradigms from the 1990s onward have failed to incorporate an element of reducing economic inequalities—even when they attempted to foster putative Palestinian economic institutional independence or encourage growth.

The Oslo process, as this report has described, was conceived as an interim phase of severely circumscribed Palestinian self-rule, during which Israel was to retain overall control over most aspects of Palestinian life through less direct means. The Oslo phase gave way to negotiations over a two-state solution predicated on a hard partition. The assumption of complete separation in which neither side would be responsible for the other—rendered any consideration of equality (economic or otherwise) moot. Yet in practice, even the two-state negotiations presumed ongoing Israeli presence over the Jordan Valley—at least temporarily—and the partition of Jerusalem, which would have had an immediate negative impact on Palestinian economic life.⁶⁰ The emerging two-state outline would have laid the groundwork for deepening inequality in the guise of independence. 

The years of two-state negotiations all focused on the combination of “core conflict issues”: borders, settlements, refugees, Jerusalem, security, religious aspects, and natural resources. The Israeli aim was to resolve these issues through maximum separation, with minimal concern for the relationship between the two future states after an agreement was signed. The lack of attention to reducing economic inequalities between the two sides is a missing dimension and an opportunity for improvement. 

Precedent in Other Conflicts

Reducing economic inequality has not been an unusual aim for conflict resolution in other parts of the world. The Good Friday Agreement of 1998 for Northern Ireland explicitly recognized that inequalities between the opposing parties were among the drivers of escalation, and the accords incorporated specific mechanisms to reduce economic differentials and advance equality of opportunity.⁶¹ In contrast to Israel and Palestine, these accords were both successfully signed, and—despite myriad difficulties—have successfully avoided, for nearly three decades, the resurgence of one of the most intractable conflicts of the twentieth century. 

Scholars Ireoluwatomi Oloke and Sean Byrne, analyzing the Northern Ireland experience, summarize the literature on peace-building as related to economic inequalities: “Impactful peacebuilding is not just about facilitating economic growth, it is also about ensuring that such economic growth emerges in an equitable manner that all members of society benefit from.”⁶² Scholars repeatedly warn that failure to address economic inequalities feeds the grievances of conflict parties that make them vulnerable to recruitment by nonstate armed groups. The conflict resolution legal scholar Limor Yehuda compared three conflict case studies—Bosnia, Cyprus, and Northern Ireland—and concluded that collective equality, including advancing economic equality, is a key dimension missing from traditional liberal theories of peacemaking focused on individual human rights, partition, or both.⁶³

Any new conflict-resolution efforts in Israel and Palestine must be grounded in reducing inequalities as an integral factor for sustainable peacemaking. The economic piece of such a policy should, similarly, aim to reduce economic inequalities. There is an important consequence of this recommendation: Not coincidentally, most of the observations about the dangers of deep economic inequality and the potential positive impact of reducing economic gaps relate to conflicts resolved in the context of a unitary state that includes significant autonomy of the two parties. (Bosnia and Cyprus, at least to date, have adopted unitary-state formulations based on federal models for peace or future peace agreements, while Northern Ireland is fundamentally devolved from the United Kingdom—but efforts to reduce inequalities are aimed at the religious communities within Northern Ireland.)

Israel and Palestine have generally been on a trajectory toward two separate states. Yet the reality is one of fundamental interdependence, based on intertwined geography, spillover populations, and shared needs related to the environment, the economy, public health, and security. Since neither land nor populations will ever be completely separate, these aspects can only be managed through institutional cooperation built into a peace agreement. Peace-building will require recognizing where the sides must have separate identities and territories, but also must acknowledge where they must function as one—whether one epidemiological family or one economic family. Hybrid political solutions, such as a confederation of two states with shared institutions for limited areas of cooperation, flow logically as a framework for meeting these needs.⁶⁴

Policy Implications

From the larger implications of peacemaking that incorporates economic growth via reduction of economic disparities, a focus on multiple dimensions of equality, and a two-state framework grounded in cooperation via shared institutions, policymakers should advance solutions to immediate needs based on these principles. The first such need, of course, is an end to the war—which is the starting point for any economic recovery. 

Next, a policy for a future peace agreement should strengthen the sources of Palestinian economic independence, without neglecting the reality of interdependence. Examples of such measures could include: 

• Create conditions for greater Palestinian access to foreign currency—without necessarily moving away from the single-currency zone.⁶⁵
• End Israel’s collection of Palestinian clearance taxes, to prevent weaponizing funds as political leverage.
• End exclusive Israeli control over customs stations for import and export, and adopt policies to reduce transaction costs and time for Palestinian trade.⁶⁶
• Reduce restrictions on Palestinian movement within the West Bank.
• Countries planning to provide political recognition of Palestinian independence should develop a series of policies for economic growth—including preferential trade agreements, educational and training exchange programs—and map the conditions that would eventually encourage foreign investment as an integral aspect of recognition (to avoid empty, declarative recognitions).

Interdependent policies to strengthen the economic viability of peace in the future include:

• Reconceptualize security to allow for the free flow of Palestinian people and goods for economic purposes—while developing a security framework focused on individual threats by either side, rather than collective restrictions of Palestinian goods and people.
• Overhaul Palestinian employment in Israel. This policy would include establishing salary structures commensurate with skills; expanding permit categories to encourage more employment of Palestinian skilled labor; and cooperating to crack down on trafficking in Israeli work permits.
• Reestablish the role of joint economic councils to coordinate policy for a single currency zone.
• Formalize the system of third-party management of clearance taxes to replace the mechanism of Israel collecting clearance taxes. (Such management is currently based on an ad hoc solution facilitated by the Norwegian government and agreed with Israel.)⁶⁷
• Introduce international standards for industry regulation, as a third-party reference point, to reduce dependence on Israel’s industry references.

These lists represent samples of policies to advance Palestinian growth, reduce inequalities, and encourage cooperation. In the current belligerent political environment, Israel’s government has little interest in peace through Palestinian self-determination. The approach here accepts this inhospitable political reality, while offering multiple strategic benefits.

First, governments who are not directly involved in working to end the war, such as most EU countries, have floundered over the question of what can be done to ameliorate the disaster in the Middle East. The proposals here suggest a clear list of demands that an actor with leverage, such as the EU, can make of Israel—but which do not carry the historic sensitivities of direct political criticism of Israel.

Second, to the extent that some of the strategies described above are compatible with Israeli interests, Israel might be pressed to agree to certain policies that strengthen the Palestinian economy. For example, Israel does not want to pay for Gaza’s reconstruction—but it is nearly impossible that any regional Arab country would be willing to spend the massive sums needed without progress toward Palestinian self-determination. If Israel can be convinced to take some of the steps described above that involve greater Palestinian economic independence, outside countries like the Gulf states might be more willing to support reconstruction.

Third, if outside actors are successful in convincing the Israeli government to advance policies for Palestinian economic rehabilitation and growth, such policies will require chipping away at Israeli control—advancing Palestine’s path toward independence.

The prospects for a peaceful way forward are, at present, dismal. But if the war ends, and the opportunity to renew efforts at comprehensive, sustainable peace arise, policymakers must be ready with far better policies than anything they have attempted in the last three decades. No one can afford another failure.

This report is part of “Networks of Change: Reviving Governance and Citizenship in the Middle East,” a Century International project supported by the Carnegie Corporation of New York and the Open Society Foundations.

Header Image Caption: A market in central Ramallah on December 9, 2023. Source: Spencer Platt/Getty Images

1. “World Development Indicators,” World Bank, https://databank.worldbank.org/source/world-development-indicators.
2. Michel Guillot et al., “Life Expectancy Losses in the Gaza Strip During the Period October, 2023, to September, 2024,”The Lancet 405, iss. 10477 (2025): 478–85, https://www.sciencedirect.com/science/article/abs/pii/S0140673624028101.
3. Bernard Avishai and Sam Bahour, “Independent and Interdependent,” Haaretz, April 2, 2010, https://www.haaretz.com/2010-04-02/ty-article/independent-and-interdependent/0000017f-e324-d7b2-a77f-e32739d50000.
4. “Note on the Impacts of the Conflict in the Middle East on the Palestinian Economy—February 2024,” World Bank, February 2024. https://thedocs.worldbank.org/en/doc/db985000fa4b7237616dbca501d674dc-0280012024/original/PalestinianEconomicNote-Feb2024-Final.pdf.
5. “Gaza and West Bank Interim Rapid Damage and Needs Assessment,” the World Bank, the EU, and the UN, February 2025, 7, https://thedocs.worldbank.org/en/doc/133c3304e29086819c1119fe8e85366b-0280012025/original/Gaza-RDNA-final-med.pdf.
6. Ibid., 3.
7. A June 2024 study found that out of forty-four attacks on Israelis within the Green Line in seventeen years, only three were committed by permit holders. See Esteban Klor, “Is There a Connection Between Palestinian Workers in Israel and Terrorist Attacks within the Green Line?,” INSS Insight no. 1866, June 17, 2024. https://www.inss.org.il/publication/palestinian-workers-data/.
8. “Palestinians Refuse to Accept Partial Tax Transfer from Israel,” Reuters, November 6, 2023, https://www.reuters.com/world/middle-east/palestinians-refuse-accept-partial-tax-transfer-israel-2023-11-06/; “Norway Assists in Scheme for Crucial Financial Transfers from Israel to Palestine,” Office of the Prime Minister and Ministry of Foreign Affairs, Government of Norway, February 18, 2024, https://www.regjeringen.no/en/aktuelt/norway-assists-in-scheme-for-crucial-financial-transfers-from-israel-to-palestine/id3025994/.
9. “PASays It Can Only Pay 50% of Civil Sector Salaries This Month as Tax Funds Withheld,” Times of Israel, May 13, 2024, https://www.timesofisrael.com/pa-says-it-can-only-pay-50-of-civil-sector-salaries-this-month-as-tax-funds-withheld/; “PA Pays 70% of Employees’ Salaries for July, as Financial Crisis Continues,” Middle East Monitor, September 5, 2024, https://www.middleeastmonitor.com/20240905-pa-pays-70-of-employees-salaries-for-july-as-financial-crisis-continues/.
10. World Bank, “Gaza and West Bank Interim Rapid Damage and Needs Assessment,” 10.
11. Bar Peleg and Hagar Shezaf, “Israel Says 40,000 Palestinians ‘Evacuated’ West Bank Refugee Camps, Vows to Stay for a Year,” Haaretz, February 23, 2025. https://www.haaretz.com/israel-news/2025-02-23/ty-article/.premium/israel-says-40-000-palestinians-evacuated-west-bank-camps-vows-to-stay-for-a-year/00000195-32c4-d670-ad97-7fd769f50000.
12. “Governor of the Bank of Israel presents a survey to Finance Committee, 22 January 2024,” The Knesset, January 22, 2024, https://main.knesset.gov.il/news/pressreleases/pages/press22.01.24a.aspx.
13. Nati Tucker, “Governor of Bank of Israel: ‘By 2025, the War Will Cost 250 Billion Shekels,” The Marker, May 30, 2024; Bezalel Smotrich (@bezalelsm), post on X, May 2, 2025, https://x.com/bezalelsm/status/1918307601793565041.
14. “Monetary Policy Report Second Half of 2024,”Bank of Israel, January 20, 2025,https://www.boi.org.il/en/communication-and-publications/regular-publications/monetary-policy-reports/monetary-policy-report-second-half-of-2024/#:~:text=According%20to%20the%20Department’s%20forecast,be%202.3%20percent%20in%202026.
15. World Economic Outlook (WEO) Database, IMF, April 2025, https://www.imf.org/en/Publications/WEO/weo-database/2025/april/weo-report?c=436,&s=NGDP_RPCH,&sy=2010&ey=2025&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1.
16. See Tomer Fadlon and Esteban Klor, “The 2025 State Budget—Confirmation of the Credit Rating Agencies’ Concerns,” INSS Insight No. 1919, December 2, 2024, https://www.inss.org.il/publication/israel-economy-2025/; and Steven Scheer, “Israel 2025 Budget Deficit Could Breach Target and Hit 5% of GDP, Official Says,” Reuters, January 13, 2025, https://www.reuters.com/world/middle-east/israel-budget-deficit-jumps-69-gdp-2024-due-war-costs-2025-01-13/#:~:text=Although%20spending%20jumped%2020%25%20in,below%20November’s%20level%20of%207.7%25; and Oren Dori, “Knesset Approves 2025 State Budget,” Globes (English), March 25, 2025, https://en.globes.co.il/en/article-knesset-approves-2025-state-budget-1001505836.
17. “The State Budget,” the Knesset, https://main.knesset.gov.il/en/about/pages/budget/budgetinfo8.aspx; and “Budget Bill for 2025 Approved in Final Readings,” the Knesset, March 25, 2025, https://main.knesset.gov.il/en/news/pressreleases/pages/press25325y.aspx.
18. “Military Spending as a Share of Government Spending,” Our World in Data (Source: Stockholm International Peace Research Institute), July 8, 2024, https://ourworldindata.org/grapher/military-expenditure-as-a-share-of-government-spending?tab=table.
19. Dahlia Scheindlin, “How the Netanyahu Government’s War on Gaza Is Killing Israel’s Future,” Haaretz, May 7, 2025, https://www.haaretz.com/israel-news/2025-05-07/ty-article/.premium/how-the-netanyahu-governments-war-on-gaza-is-killing-israels-future/00000196-a78e-df59-abde-e7ae1c230000?lts=1746878708952.
20. Fadlon and Klor, “The 2025 State Budget.”
21. Fadlon and Klor, “The 2025 State Budget.”.
22. Tamar Hermann et al., “Israel Voice Index, February 2025,” Israel Democracy Institute, March 9, 2025, https://en.idi.org.il/articles/58648.
23. “Prime Minister’s Office – Labor Ministry Joint Statement: Government Approves Structural Reform in the Foreign Workers Sector, in order to Maintain Functional Continuity and Lower the Cost of Living: The Government Approves Structural Reform in the Foreign Workers Sector to Maintain Functional Continuity and Lower the Cost of Living,” Prime Minister’s Office, Government Press Office, May 15, 2024.
24. Dotan Levy, “Housing Prices Wait for No One: 7.8% Leap in One Year,” Calcalist, January 16, 2025, https://www.calcalist.co.il/real-estate/article/byzxa5hpkx.
25. Thibault Spirlet, “Israel’s Tourism Industry Is Struggling Under the Weight of the War,” Business Insider, August 18, 2024, https://www.businessinsider.com/israels-tourism-industry-is-struggling-under-the-weight-of-war-2024-7.
26. Fadlon and Klor, “The 2025 State Budget.”
27. Dahlia Scheindlin, “Israel Is Already Becoming an International Pariah. Do Israelis Care?,” Haaretz, May 8, 2024, https://www.haaretz.com/israel-news/2024-05-08/ty-article-magazine/.premium/israelis-are-starting-to-feel-what-its-like-to-be-an-international-pariah/0000018f-5842-dd02-adbf-7fcbf63e0000.
28. “2025 High-Tech Employment: Status Report,” Israel Innovation Authority, April 2025, https://innovationisrael.org.il/en/wp-content/uploads/sites/3/2025/04/Innovation-Authority-High-Tech-Employment-Report-English-Final.pdf.
29. Ibid, 5
30. Ministry press communiques; Defense Ministry spokesperson, conversation with author, February 4, 2025.
31. World Bank, World Development Indicators.
32. “A Year of War in Gaza: Impacts on Employment and Livelihoods in the West Bank and Gaza Strip,” International Labour Organization, October 2024, https://www.ilo.org/sites/default/files/2024-10/A%20Year%20of%20War%20in%20Gaza-Bulletin%205-October%202024-FINAL%28en%29.pdf.
33. IMF, WEO database, April 2025, https://www.imf.org/en/Publications/WEO/weo-database/2025/april/weo-report?c=436,487,&s=NGDP_RPCH,NGDPD,NGDPRPPPPC,NGDPDPC,&sy=1993&ey=2026&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1.
34. World Bank, World Development Indicators.
35. Raphael Gassel et al., “An Israel-Palestine Economic Assessment” in Federal Forum—Economic Group, a working group on economics and peace, 2025 (unpublished).
36. Dahlia Scheindlin, “How Israel Is Bringing West Bank-style Annexation to Gaza,” Haaretz, April 10, 2025, https://www.haaretz.com/israel-news/2025-04-10/ty-article/.premium/how-israel-is-bringing-west-bank-style-annexation-to-gaza/00000196-1f3c-d78d-a1de-1f3df9aa0000; David Gritten, “Israel Security Cabinet Approves Plan to ‘Capture’ Gaza, Official Says,” BBC, May 5, 2025, https://www.bbc.com/news/articles/cwy04km1zk0o.
37. See Gershon Shafir and Yoav Peled, eds., The New Israel: Peacemaking and Liberalization (Oxon: Taylor and Francis, 2000); and Dahlia Scheindlin, The Crooked Timber of Democracy in Israel: Promise Unfulfilled (London and Berlin: De Gruyter, 2023), chap. 15.
38. Shafir and Peled, The New Israel, 246.
39. “Gaza-Jericho Agreement Annex IV Protocol on Economic Relations Between the Government of the State of Israel and the p.l.o., Representing the Palestinian People,” Paris, April 29, 1994, https://www.peaceagreements.org/media/documents/ag36_55ddcb52e2cb2.pdf.
40. Sam Bahour, interview with the author, March 2, 2025.
41. See, for example, Noga Kadman, “1987–1997: A Decade of Human Rights Violations Information Sheet,” B’Tselem, January 1998, https://www.btselem.org/sites/default/files/publications/199801_decade_of_violations_eng.pdf; and “Human Rights Watch/Middle East Urges Israel To Lift Restrictions On Palestinian Movement Within West Bank And Gaza,” Human Rights Watch, August 8, 1997, https://www.hrw.org/news/1997/08/08/human-rights-watch/middle-east-urges-israel-lift-restrictions-palestinian-movement.
42. “Developments in the Economy of the OPT-UNCTAD Report,” UN, September 11, 1995. https://www.un.org/unispal/document/auto-insert-186916/.
43. “Economic Situation in the Opt—World Bank Note, the Fourth Meeting of the Consultative Group for the West Bank and Gaza,” UN, November 6, 1996, https://www.un.org/unispal/document/auto-insert-208642/.
44. “The Separation Barrier,” Ir Amim, https://www.ir-amim.org.il/en/issue/separation-barrier.
45. See Steven Plaut, “Has Oslo Brought a Peace Dividend?” Middle East Quarterly 4, no. 3 (Summer 1997), https://www.meforum.org/middle-east-quarterly/has-oslo-brought-a-peace-dividend.
46. “Foreign Direct Investment, Net Inflows (Bop, Current Us$)—Israel,” World Bank, https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD?locations=IL/.
47. On Northern Ireland, see Ireoluwatomi Oloke and Sean Byrne, “The Political Economy of Sustainable Peacebuilding in Northern Ireland,” International Journal of Peace Studies 26, no. 2 (Winter 2021): 1–23. On economic hardship and terror mobilization, see Ethan Bueno de Mesquita, “The Quality of Terror,” American Journal of Political Science 49, no. 3 (July 2005): 515–30.
48. Raphael Ahren, “Netanyahu: Economics, Not Politics, Is the Key to Peace,” Haaretz, November 30, 2008, https://www.haaretz.com/2008-11-20/ty-article/netanyahu-economics-not-politics-is-the-key-to-peace/0000017f-f49d-d47e-a37f-fdbd12a10000.
49. Nizan Feldman, “Economic Peace: Theory versus Reality,” Strategic Assessment 12, no. 3 (2009): 19-28, https://www.inss.org.il/wp-content/uploads/sites/2/systemfiles/(FILE)1259657930.pdf.
50. “Real GDP Growth, Annual Percent Change: West Bank and Gaza,” International Monetary Fund, https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/WBG?year=2025.
51. “Transcript of the Address by PM Benjamin Netanyahu at UN General Assembly,” World Jewish Congress, September 26, 2011, https://www.worldjewishcongress.org/en/news/transcript-of-the-address-by-pm-benjamin-netanyahu-at-un-general-assembly.
52. Based on Palestinian Central Bureau of Statistics, reported in “GDP, GDP Per Capita Up in Q3 2015, says Statistics Bureau,” Wafa News Agency, December 31, 2015. https://english.wafa.ps/Pages/Details/85721#:~:text=GDP%20per%20capita%20for%20Palestine,29.0%25%20during%20the%20same%20period.
53. “2020 Investment Climate Statements: West Bank and Gaza,” U.S. Department of State, https://www.state.gov/reports/2020-investment-climate-statements/west-bank-and-gaza/#:~:text=In%202019%2C%20the%20economy%20grew,expected%20to%20continue%20through%202021.
54. “Annual Report, 2019,” Bank of Israel, https://www.boi.org.il/media/05tibqjj/chap-5e.pdf.
55. World Bank, World Development Indicators.
56. Arie Krampf, “The Netanyahu Doctrine,” Jerusalem Strategic Tribune, November 2022, https://jstribune.com/krampf-the-netanyahu-doctrine/.
57. Frances Stewart, “Horizontal Inequalities as a Cause of Conflict: A Review of CRISE Findings,” Centre for Research on Inequality, Human Security and Ethnicity (CRISE), Oxford University, August 20, 2010, https://openknowledge.worldbank.org/entities/publication/86dc685b-d5d4-53e2-ab25-10e7177a2a4f. For a literature review, see Gudrun Østby, “Inequality and Political Conflict,” in World Social Science Report 2016: Challenging Inequalities: Pathways to a Just World, UNESCO, 2016, https://unesdoc.unesco.org/ark:/48223/pf0000245825.
58. Lars-Erik Cederman, Nils B Weidmann, and Nils-Christian Bormann, “Triangulating Horizontal Inequality: Toward Improved Conflict Analysis,” Journal of Peace Research 52, no. 6 (2015): 806–21.
59. Stewart, “Horizontal Inequalities as a Cause of Conflict,” 2-3.
60. “Clinton Parameters (2000),” Israeli–Palestinian Conflict Database, Economic Cooperation Foundation, https://ecf.org.il/issues/issue/165.
61. For a thorough analysis of these provisions, see R. O’Connell, F. Ní Aoláin, and L. Malagón, “The Belfast/Good Friday Agreement and Transformative Change: Promise, Power and Solidarity,” Israel Law Review 57, no. 1 (2024): 4-36.
62. Oloke and Byrne, “The Political Economy of Sustainable Peacebuilding in Northern Ireland,” 5.
63. Limor Yehuda, Collective Equality: Human Rights and Democracy in Ethno-National Conflicts (Cambridge: Cambridge University Press, 2023).
64. Dahlia Scheindlin, “Two States, Together: An Alternative Vision for Palestinians and Israelis,” The Century Foundation, January 27, 2025, https://tcf.org/content/report/two-states-together-an-alternative-vision-for-palestinians-and-israelis/.
65. I am grateful to Sam Bahour for contributing significantly to this list.
66. For a detailed if somewhat out-of-date analysis, see: “Facilitating Global Trade Through Jordan and Egypt,” Trade Corridors Facilitation Project, October 2009, https://paltrade.org/uploads/1595095277248874535.pdf/.
67. “Norway Assists in Scheme for Crucial Financial Transfers from Israel to Palestine,” Government of Norway, February 18, 2024, https://www.regjeringen.no/en/aktuelt/norway-assists-in-scheme-for-crucial-financial-transfers-from-israel-to-palestine/id3025994/’ and “Norway Is Transferring Palestinian Clearence [sic] Revenues: Press Release,” Government of Norway, January 12, 2025. https://www.regjeringen.no/en/aktuelt/norway-is-transferring-palestinian-clearence-revenues/id3083079/.

Tags: israel palestine, economic equity, global economy, palestine