Education and Wages in the West Bank and Gaza 1995-2004: Testing the Aggregate Effects of the Education Premium Over Time
The annexation of the Palestinian territories by Israel in 1967 caused the Palestinian economy to be inexorably integrated with that of Israel. Palestinians increasingly have relied on the export of labor into Israel, a market with more jobs and higher wages. Studies indicate that as Palestinians became increasingly educated their wages did not rise accordingly. That is, the returns to education that normally apply, particularly in developing countries, did not hold true in the Palestinian case. Since the Oslo accords of 1995, the Palestinian people have had partial self-rule, which, as limited as it may be, does allow for scenarios of economic development, particularly when paired with increases in international development aid. Accordingly, this paper tests whether Palestinian economic enrichment over the past ten years has been effective in achieving higher wages, or whether strict closure measures imposed by the Israeli government have further reduced the returns to education for the population. Analyzing aggregate labor and economic data for the Palestinian working population from 1995-2004, I conclude that over time higher education has served to benefit the Palestinian population living and working in the West Bank and Gaza, as well as those who work in Israel, and that the effect of the Intifada has been minimal. As such, it is essential that international donors and the Palestinian government continue to invest in educational programs and institutions of higher learning. The future Palestinian state, now in its early stages of formation, depends on such enrichment to ensure its continued growth.
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