Military conflicts can change the relationships between ethnic groups and affect the labor market. This study estimates the effect of rocket attacks on Israel during the Second Lebanon War and from the Gaza Strip (during operations Cast Lead, Pillar of Defense, and Protective Edge)—and the geographic variance in exposure to rocket attacks—on the probability of Israeli Arab workers’ separation from Jewish-owned businesses, compared with their similar Jewish colleagues.

In general, the conflicts’ effect on the relative probability of separation of Arab workers is small. The probability declined by 0.7 percentage points in the 3 months following the Second Lebanon War (before the war, the relative probability of Arabs was about 2.6 percentage points lower), after Operations Cast Lead and Pillar of Defense—which were at a much lower intensity than the other conflicts—there was no change in the relative probability of separation, and after Operation Protective Edge the probability increased by 0.8 percentage points across the country (before the operation, the relative probability of Arabs was 1.4 percentage points lower) and by 2.2 percentage points in the Southern district (near Gaza Strip). During the year after the end of the Second Lebanon War, the relative probability returned to its prior levels, and in the year after Operation Protective Edge the increase in relative probability declined but remained statistically significant.

In most cases, we did not find that the magnitude of exposure to rocket fire—the number of warnings (sirens), rocket hits, or compensation for damage to property in workers’ business or residential localities—had an effect on the relative probabilities. Nor did we find heterogeneous effects by demographic, social, economic, or other characteristics of the workers, employer, and business, except for a stronger impact on Muslims compared to other Arabs, Arab women compared to Arab men, and businesses in mixed localities compared to those in Jewish ones.

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