By concentrating on two issues central to the Palestinian economy, refugees and urban agglomerations, this chapter provides a valuable and original contribution to the literature on the Palestinian economy. Eduardo de Castro and Chris JensenButler propose a strategy for growth that sees refugees, both as individuals and as factors of urban density, as an asset rather than a liability. In their view, the long-term sources of Palestinian growth do not lie simply in expanding trade relations, good governance and sound fiscal policy, as the World Bank and IMF have recommended. Growth also requires a strategy to reduce productivity gaps at the international level, and to transform the economy into a knowledge-based economy. The key factors for such a transformation are skills, social capital and externalities of localisation as well as of agglomeration. Both refugees and urban agglomerations, such as Gaza City, are valuable resources that would make such a transformation possible, especially when accompanied by the right policy framework.