The interaction between external and internal ethnic conflicts is a prominent feature of world politics, yet the effects of this interaction on labor markets has rarely been examined. We study the effect of the second Intifada, a violent conflict between Israel and its Palestinian neighbors which erupted in September 2000, on labor market outcomes of Arab citizens of Israel. The analysis relies on a large matched employer-employee dataset, focusing on firms that in the pre-Intifada period hired both Arabs and Jews. Our analysis demonstrates that until September 2000 Arab workers had a lower rate of job separation than their Jewish peers and that this differential was significantly reduced after the outbreak of the Intifada. We argue that the most plausible explanation for this pattern is anti-Arab discrimination among Jews.
