Three Essays on Labour Market and Efficiency of Development Interventions

This dissertation examines the effects of structural deficiencies in the Palestinian labour market on three critical dimensions that have different long-lasting effects on sustainable development in Palestine. The Palestinian labour market is characterized by low efficiency, poor regulation and high segmentation. This is reflected by poor work conditions, work-related gender bias against women, low rates of labour force participation of women, low wages compared with high living expenses, weak labour unions and high unemployment rates. These structural problems and the associated high unemployment rate have obliged a large part of the Palestinian labour force to seek employment outside Palestine, enhancing the brain drain. They also prompted the present study on the effects on three different dimensions: 1) the effect of adopting anti-discrimination policies of recruitment with equal opportunities for men and women and the extent to which this inequality of recruitment creates a gender pay gap; 2) the effect of brain drain on the ability of current human capital stock in leveraging capital-intensive production by facilitating diffusion of technology across Palestinian firms; 3) the social aspects of high unemployment, specifically the effect of unemployment and associated poverty on the effectiveness of international and local aid programs. The importance of this dissertation stems from the need to understand the socio-economic results of more than 20 years of investment in the Palestinian economy since the Oslo agreement of 1993. The Oslo agreement maintained borders under the full control of Israel and did not give the Palestinians full access to their natural resources. Constrained access to international markets and inability to achieve full utilization of natural resources undermine sustainable development. The first chapter examines gender-based occupational segregation and its association with gender pay discrimination in the private and public sectors of the Palestinian labour market, and measures the effect of this discrimination on female employment. This study is timely since the Palestinian Authority has implemented antidiscrimination polices to ensure equal opportunity for men and women. This chapter also examines the critical role of investment in education in segregating or desegregating the labour market. The main results indicate that the recruitment mechanism used by the public and private sectors leads to occupational segregation by gender in both sectors. Although there is gender-based segregation in the public sector, it did not cause a pay gap to the detriment of women, which demonstrates that the public sector effectively implemented antidiscrimination policies. The most harmful discrimination exists in the private sector where there is a large pay gap against women. This discrimination against women has resulted in loss of women's jobs in favour of men. The present chapter provides strong evidence that the Palestinian labour market is still inefficient. Policy makers are urged to take further steps to mitigate discrimination against women in employment and promotion policies. The second chapter examines the issue of human capital accumulation as a result of investment in education and vocational training and the extent to which it facilitates the diffusion of technology across Palestinian firms. We focus on the quality of the people employed by Palestinian firms, and estimate the extent to which the decision to adopt new technology is affected by the existence of skilled and educated labour. The results confirm that despite the brain drain of Palestinian human capital from the local market, the current human capital still plays a critical role in decisions to adopt new technologies. Once a firm recognizes that the type of product it produces requires a specific type of technology, it hires staff qualified to handle this technology. The third chapter focuses on social aspects of structural deficiencies in the labour market and examines how high unemployment and poverty rates undermine international and local aid programs aimed at securing food and reducing hunger in vulnerable households across the West Bank and Gaza Strip. We compare international and local aid programs and cash versus in-kind interventions. The results show that although international aid programs have failed to pull households out of poverty due to the high unemployment rate, there is still evidence that these programs play a critical role in mitigating food insecurity and reducing hunger.