Determinants of Labor Supply and Labor Force Participation in the West Bank ‎and Gaza Strip

This study estimated labor supply and 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 effect of real wages policies was significant on labor supply in the West Bank owing to the high uncompensated wage elasticity of labor supply. However, wage policies did not affect labor supply in Gaza. Further, labor supply elasticity, with respect to labor demand, was relatively high which indicates that policies aimed at reducing unemployment should focus on job creation, but not on policies affecting labor supply. Finally, the results showed that current labor supply was positively related to labor supply in the previous period.