Israel's economy would gain more than $120 billion as a dividend in the next decade should a peace agreement be secured between the country and her neighbors, including the creation of a Palestinian state, according to a new study by a U.S.-based think tank.

Conducted by the Rand Corporation, the study also predicts that the Palestinians would realize $50 billion in economic benefits during that period, including a 36% jump in per capita income. By contrast, researchers said, a new wave of violence between Israel and the Palestinians would have a major negative economic impact on both sides in the conflict, with Israel alone losing out on a projected $250 billion in economic opportunities over the decade. As for the Palestinians' side, their per capital GDP could fall by as much as 46%, the authors noted.

The study, entitled “The Costs of the Israeli-Palestinian Conflict,” also explored the impact of three other scenarios, contrasting their likely economic and security-related costs and benefits with current trends. The three options are what the Rand Corporation call “a coordinated unilateral withdrawal” by Israel from the West Bank; an uncoordinated withdrawal in which Palestinian coordination is absent; and nonviolent resistance to Israel on the part of the Palestinians.

“The implications of a unilateral withdrawal by Israel of West Bank settlers would depend greatly on the degree of coordination," according to the study. "If the Israelis were able to coordinate with both the Palestinians and international community, the overall impact on the Israeli economy would be negligible, and the Palestinian economy would benefit from an economic dividend of nearly $8 billion over a 10-year period. However, with no coordination, the Israelis would stand to lose $20 billion.

“In the nonviolent resistance scenario, Palestinians would take actions to put economic and international pressure on the Israelis - a scenario some observers note may already be unfolding. In this event, Israelis could lose $80 billion and Palestinians could lose $12 billion relative to current trends. But compared with a two-state solution, losses from the nonviolent resistance scenario become even more dramatic: about $200 billion for the Israelis and $60 billion for the Palestinians.”

“A two-state solution produces by far the best economic outcomes for both Israelis and Palestinians,” said Charles Ries, co-leader of the study and a vice president at Rand. “In a decade, the average Israeli would see his or her income rise by about $2,200 vs. a $1,000 gain for Palestinians, compared with our projection for present trends. But that only works out to 5% for each Israeli, vs. 36% for the average Palestinian, meaning Israelis have far less and Palestinians far more economic incentive to move toward peace.”

In a landmark speech at Bar-Ilan University in 2009, Prime Minister Benjamin Netanyahu declared his support for a two-state solution involving establishment of a demilitarized Palestinian state “that would recognize the Jewish state.”

By contrast, in March of this year, in the run-up to that month’s Knesset election, the Prime Minister’s Office stated: “Prime Minister Netanyahu has made clear for years that given the current conditions in the Middle East, any territory that is given up will be seized by radical Islam, as was seen in the Gaza Strip and in southern Lebanon.” Such a scenario, it added, is particularly likely “in a reality in which the Palestinian Authority is in an alliance with the Hamas terrorist organization.”

Since the election, however, Netanyahu has reiterated his support for a demilitarized Palestinian state: At the end of last month, for example, he called on the Palestinians to enter negotiations with Israel, but without preconditions.

“I remain committed to the idea that the only way we can achieve a lasting peace is through the concept of two states for two peoples," he said. "A demilitarized Palestinian state that recognizes the Jewish nation-state of Israel."