This study investigates the interaction between wages and labor force participation in Palestine for the period of 2000 to 2011. This period has witnessed series of severe economic and political shocks and moderate recoveries. There are three areas of interest this dissertation considers. The first area is the effect of adult employment and income on child labor supply. The second area is the effect of husbands’ income and employment status on wives’ labor force participation. The third area is return to education and wage inequality. The results show that parents’ income has a negative but weak effect on child labor; parents’ employment was found to have a positive effect on child labor in the West Bank but no effect in Gaza Strip. The study concludes that lack of employment opportunities and lack of employment opportunities with adequate income for adults is probably the underlying cause for child labor in Palestine. In addition, the results show that husband’s employment has a positive effect on wife’s labor force participation and husband’s second job has a strong positive effect on wife’s participation. Husband’s income was found to have a negligible negative effect on wife’s participation in the labor market. The study concludes that labor market conditions and the perception of finding employment have a stronger effect on wives’ participation in the labor market than husbands’ income and employment.