COVID-19 Crisis and Business Resilience in Palestine: How Policy Responses Affect Firms’ Performance

The COVID-19 pandemic has significantly impacted businesses worldwide, challenging firms to adapt and build resilience amidst unprecedented disruptions. This study investigates the business resilience strategies employed by Palestinian firms during the pandemic, focusing on the roles of digital transformation, labor market adjustments, and policy interventions. Drawing on panel data from the COVID-19 Business Pulse Survey (2020–2021), the study highlights the effectiveness of these responses in shaping firm performance, particularly among micro, small, and medium-sized enterprises (MSMEs). Key findings reveal a stark digital divide, with only 15.8% of SMEs adopting digital solutions compared to 44.3% of large firms, reflecting broader structural constraints in the Palestinian economy. Despite these challenges, digital adoption was associated with reduced closure days and increased business continuity, although implementation costs and infrastructural limitations hindered broader success. Labor market adjustments varied significantly across sectors, with telework benefiting higher-skilled roles while exacerbating inequities for women and informal workers. Policy measures, including the Estidama fund and labor market agreements, provided critical support but were limited in reach due to fiscal constraints and pre-existing vulnerabilities. The findings underscore the need for targeted interventions to bridge digital and resource gaps, enhance labor protections, and develop robust digital infrastructure to ensure equitable resilience. This research contributes to the understanding of crisis responses in conflict-affected developing economies, offering actionable insights for policymakers to foster sustainable business resilience in the face of future shocks.