Effect of parental job loss on child school dropout. Evidence from the Occupied palestinian territories

We study the effect of parental job loss on child school dropout in developing countries. We focus on Palestinian households living in the Occupied Palestinian Territories and having the household head employed in Israel during the Second Intifada (2000–2006). We exploit quarterly variation in conflict intensity across districts in the OPT to instrument for Palestinian workers’ job loss in Israel. Our 2SLS results show that parental job loss increases child school dropout probability by 9 percentage points. The effect varies with child and household characteristics. We provide evidence that the effect operates through the job loss-induced reduction in household income.