Two Free DP Downloads 07 February 2020 - Globalisation cycles: a new depiction of shifts in the world economy and Inter-ethnic income inequality and conflict intensification in mandate Palestine

Friday, February 7, 2020

GLOBALISATION CYCLES: A new depiction of shifts in the world economy  
Maurice Obstfeld  
CEPR DP No. 14378 | 02 February 2020

A CEPR study by Maurice Obstfeld, former chief economist at the International Monetary Fund (IMF), explores the concept of ‘globalisation cycles’ in the wake of the failure of the global economy to return to pre-trauma normalcy, followed by a process of international economic disintegration in the face of changed geopolitical realities.  

He summarises that globalisation can elevate the need for state action, but also may limit state action. Thus, globalisation may be subject to cycles, expanding when economic conditions are more vibrant and accommodative, but then contracting when adverse shocks motivate countries to deploy economic tools that are inconsistent with free and open markets.

Because globalisation can foster economic convergence among countries, but also sharpen political and economic competition, it may also eventually upset the geopolitical equilibrium that nurtured convergence, and perhaps especially, equilibria characterized by a hegemonic leader.

Figure 1: Ratio of Global exports to GDP (percent)

Source: Catão and Obstfeld 2019. 

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Laura Panza and Eik Swee    
CEPR DP No. 14366 | 30 January 2020

A new study by Laura Panza and Eik Swee examines the effect of inter-ethnic income inequality on conflict intensification in Palestine during the period 1926-1945. 

The results show a substantial effect of inequality on conflict intensification, especially during periods where the relationship between Arabs and Jews were particularly strained. The results are driven by Arab-initiated attacks, reflecting local average treatment effects of Arab farmers who move from agrarian work to violence in response to adverse rainfall shocks, suggesting that economic shocks coupled with existing economic segregation facilitate the transition into violence when opposing groups are economic substitutes. Among the findings:

  • The Mandate period was crucial in setting the foundations of the Israeli-Palestinian conflict. 
  • It was during this time that Palestine witnessed an intensification in ethnic violence, which eventually led to the first Arab-Israeli war.  
  • Jew-Arab income inequality over this period escalated inter-ethnic hostilities: the effects are especially strong when considering institutional settings where the relationship between Arabs and Jews were particularly strained, such as periods of pro-Zionist British rule or high Jewish immigration.
  • A 10% increase in Jew-Arab income inequality led to twice as many conflict events and three times more casualties. 
  • While Jew-Arab income inequality induced more violence on average, when identifying the ethnic identity of victims and aggressors, the effect was driven by Arab-initiated events which correspondingly resulted in more Arab casualties.
  • Inequality-driven violence, especially Arab-initiated violence, was not the result of opportunity costs or appropriation, but rather an expression of resentment. 

While the case of Mandate Palestine is of course distinct, the overlap of existing inter-ethnic hatred with economic inequality is certainly not unique to Palestinian Jews and Arabs. 

Figure 5: Map of Palestine, 1937


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