Aggregate and Sectoral Production Functions of the West Bank and Gaza Strip

The purpose of the study is to estimate production functions at the aggregate and sectorial level of the Occupied Palestinian Territories OPT over the period 1970-87 using regression analysis. The results show that production in the West Bank exhibits mostly constant and decreasing returns to scale with the exception of the industrial sector. While production in the Gaza strip exhibits increasing returns to scale except the service sector. The marginal productivity of capital in the West Bank was almost three times larger than that of the Gaza Strip. Labor was the most productive in the industrial and construction sectors in both regions even though the order of the sectors is reversed. Also, the marginal rates of technical substitution were lower in the West Bank than in the Gaza Strip except the industrial sector.