INVESTIGATING THE PALESTINIAN LABOR MARKET 1999-2010

Abstract

The recent uprisings in the Middle East came as a huge surprise to the world because we know very little about the economic grievances of these individuals. Since the Palestinian labor market is among the most complex in the region, a thorough analysis of its key features will make a great contribution to our understanding of Middle East labor markets.

My dissertation aims to investigate the Palestinian labor market. Largely due to data constraints, little is known about key features of that labor market. However, I have obtained access to under-utilized data to address three major issues that profoundly impact the residents in these areas: inter-industry wage dispersion, the migration decisions of Palestinians, and the social welfare consequences of the Gaza Blockade.

In the first chapter, I examine inter-industry wage dispersion in the West Bank and the Gaza Strip and question the roles of the standard competitive wage model as well as the efficiency wage model. I find that both models play a role in explaining inter-industry wage dispersion in the West Bank and Gaza. Specifically, observable human capital characteristics, unobserved labor quality and labor market segmentation along the public and private sector represent the most suitable explanations for inter-industry wage dispersion.

In the second chapter, the current blockade on the Gaza Strip is used as a natural experiment to quantify the social welfare implications of strictly defined labor mobility restrictions. The results suggest that the blockade produced a level of welfare loss that is equivalent a joint decrease in real domestic and foreign wages by approximately 64% and 18% respectively, when labor markets were integrated.

Finally, in the third chapter, I investigate the impact of politically-determined barriers on labor flows in the West Bank. The findings show that residence-based ID cards exert the greatest force in shaping the decision to migrate as well as the decision to return for male residents of the West Bank. Further, border closures and closure obstacles negatively impact out-migration but play a minimal role in the return-migration decision relative to the expected wage gain from migration.