Simulating the Economic Impact of Occupation-Imposed Sanctions Through Reduced Palestinian Labor in Israel on Macroeconomic Variables in Palestine: A Study Using the Computable General Equilibrium (CGE) Model

Objectives: This study aims to simulate the potential macroeconomic impacts of economic sanctions imposed by the occupation, specifically examining effects stemming from reduced Palestinian labor mobility to Israel. Method: A computable general equilibrium (CGE) model was employed, combined with a descriptive-analytical approach integrating a literature review of economic growth theories and relevant empirical studies. Results: The simulation of a 90% reduction in Palestinian workers in Israel, a plausible scenario in the aftermath of the Gaza war reveals significant adverse macroeconomic impacts. The results indicate that unemployment increases by 15.69%, real GDP contracts by 6.39%, and household consumption declines by 21.77%. Furthermore, imports decrease by 5.30%, the Consumer Price Index (CPI) rises by 3.71%, and total government revenue falls by 2.07%. These interconnected outcomes highlight the severe economic repercussions of restricting labor mobility under occupation, exposing systemic vulnerabilities in consumption patterns, trade dynamics, and fiscal stability. Conclusions: The findings highlight the acute vulnerability of the Palestinian economy to external shocks, particularly occupation-driven labor market constraints. The study recommends reducing dependence on foreign labor markets and urges policymakers to develop mitigation strategies, including economic diversifying and enhancing domestic labor market capacity to absorb displaced workers.