Assaf Zimring writes to me:
Since we tend to associate high unemployment with any economic calamity, people don’t seem to think a lot about why we see very high unemployment in Gaza. But I am puzzled by it. How come an economy with such tremendous shortages fails to employ 40% of its workers in an attempt to meet these shortages?
Has the (by now, fairly loose) blockade pushed the MPL to zero for 40% of workers? Is it uncertainty that stops investment? Did large aid payments (in some years – 50% of GDP) cause some kind of a Dutch disease of an epic scale (though I am not sure that would lead to unemployment)? I wonder if you have any thoughts about that.
At the first link you will find some interesting papers by Assaf on the Gaza blockade and other Gaza shocks. One option of course is simply that hardly anyone is really employed, although there is massive underemployment in grey and black market economies, including for the digging of tunnels and subsistence agriculture.