In this article I analyze the labor market in the West Bank and Gaza Strip during
the period following the Al-Aqsa Intifada 2000 - 2008, and estimate the influence of
changes in the rate of unemployment and daily wages on the labor force participation rate
in both territories.
This study estimated labor force participation rate functions in the West Bank and
Gaza Strip by using regression analysis. It was found that the discouraged workers’ effect
dominated the added workers’ effect in both the West Bank and Gaza labor force. Also, it
was found that the daily wage had no statistical influence on the participation rate in
West Bank. That can be explained by the political situation in that territory represented
by the frequent curfews and numerous Israeli check points, which restrict labor mobility
and hence, participation. However, the daily wages had the expected sign but only that
for the Gaza Strip was statistically significant.