Labor Markets and Peace: The Case of Jordan

Abstract This paper analyzes the impact of the peace process on Jordanian labor markets in light of the lessons from past shocks, such as the oil boom and the Gulf war. Scenario results indicate that the impact on unemployment and output in Jordan depends on the numbers that choose to return to the West Bank and Gaza and the extent to which Jordanians and returnees are substitutes. Gradualism is in the interest of all parties - sudden disruptions to the supply of labor would result in serious adjustment costs and output losses for Jordan while absorptive capacity for migrants will be initially limited in the West Bank and Gaza.