Narrow Results

This study compares the private returns to education in Palestine and Turkey over the period 2004-2008. Alhough educational enrollment ratios are similar in both countries, the labor force participation of women is much lower in Palestine: such structural differences are likely to affect labor market outcomes especially along gender lines. In both countries, the results show high returns to an additional year of education at the two-year tertiary and the university levels. The returns to education are higher for females than for males in both countries, although the gender gap is larger in Palestine than in Turkey. In Turkey, with its open borders and stronger export potential, private-sector capacity is much greater than in Palestine. Workers in Turkey earn higher returns to education in both the formal and informal private sectors than do workers in Palestine, whose labor market is dominated by the government sector and the international organizations. Overall, the results imply that years of schooling and experience explain wages better in Turkey than in Palestine, and that within Palestine they explain wages better for women samples than for men.

This study is the first to analyze wage differentials and sector choice by gender in Palestine. It uses Palestine Central Bureau of Statistics Labor Force Surveys for the years 1999, 2001, 2007, and 2010. The results show positive, although relatively low, returns to education at all levels. They indicate stark differences by gender from the viewpoint of sector choice, returns to education, and decomposition of sector and gender wage differentials. The low returns to education in Palestine tend to diminish the importance of the endowment effect in explaining the sector and gender wage gaps. Analysis of gender wage differentials shows that in the public sector, predicted log hourly wages are consistently higher for women than men, but in the private and ‘other’ sectors the results are mixed. Such wage differentials help explain why better educated women migrate toward the public sector, and those with lower educational levels are more likely to be found in the private sector.