Human capital theory posits that education significantly impacts individual earnings, economic growth, and development. Education is considered a crucial investment for personal and societal economic advancement, often serving as a tool to reduce gender inequality and social mobility. While higher education can lead to higher productivity and wages (compression effect), it may also exacerbate inequality by increasing the wage premium for skilled workers (composition effect). The interplay between these effects is complex, with studies suggesting that after a certain threshold, increased skilled worker supply reduces income inequality. The impact of gender and higher education on wage variations is widely studied, with women's higher education often associated with lower income inequality or a reduced gender wage gap. However, the impact is influenced by factors such as government policies, and the benefits of educational expansion aren't always evenly distributed. In Palestine, women face significant barriers to labor force participation, including cultural norms, limited opportunities, and occupational segregation, resulting in a substantial gender wage gap despite a high percentage of women with higher education. This study addresses the gap in research by investigating the impact of women's higher education on wage inequality in Palestine using a mixed methodology.

Extensive literature explores the relationship between wage inequality and education. Studies using the Mincer equation and Gini index have shown that higher education generally leads to higher wages, and women's higher education can reduce gender wage gaps. However, the effect of education on income inequality can be positive or negative depending on various factors like government policies, and the composition and compression effects of increased skilled labor. Some studies have found higher wage gaps in specific sectors (e.g., industrial sectors versus service sectors in Indonesia), and differences in field of study (numeracy vs. literacy) also impact wages. In the Palestinian context, research indicates that women face significant barriers to labor market participation, including occupational segregation, cultural differences, and the impact of the Israeli occupation. These factors contribute to a gender wage gap despite a high percentage of women with higher education. This study uniquely combines the Mincer equation and decomposed Gini index to analyze the impact of women's higher education on wage inequality in Palestine, addressing the absence of such research in this specific context.

This study utilized data from the Palestinian Central Bureau of Statistics' (PCBS) annual Labor Force Surveys (LFS) from 2010 to 2020. The LFS covers both the West Bank and Gaza Strip, providing information on demographic characteristics, employment type, and wages. The study focused on a subsample of wage employees (65-70% of the total employed). The Mincer earnings function was employed to analyze wage determinants, modeled as: log wᵢ = b₀ + Σ βₖdₖᵢ + δ₁age + δ₂age² + Σ γⱼyⱼᵢ + εᵢ, where 'w' represents the average daily wage, 'd' represents binary education variables (schooling, high education, higher education), age proxies for experience, and 'y' represents other explanatory variables (gender, locality type, marital status). Ordinary least squares (OLS) were used for estimation. Total wage inequality was measured using the Gini index, and the contribution of each factor to overall wage inequality was assessed using the decomposed Gini index (Wagstaff et al., 2003), which allows analyzing the share of inequality attributable to each cofactor (education levels, experience, gender, locality, and marital status). The decomposed Gini index equation is: G(w) = Σ αₖG(dₖ) + Σ αₘG(ageₘ) + Σ αⱼG(yⱼ) + G(e), where G(w) is the overall Gini index of wages, G(dₖ) represents inequality in education categories, G(ageₘ) represents inequality in experience, G(yⱼ) represents inequality in other factors, and G(e) represents unexplained inequality.

The descriptive analysis revealed that men consistently earned higher wages than women across all education levels and years (2010-2020). While the average daily wage increased with education levels for both genders, the gender wage gap also increased for those with only school education. However, for high and higher education, the wage gap showed a slight decrease or fluctuation over time. Regarding labor force participation, the employment rate for men remained relatively stable, while unemployment and the share of women outside the labor force showed slight decreases. The regression analysis (Table 4) indicated that men earned significantly higher wages than women across the studied years (2010, 2015, 2020), although the wage gap decreased over time. Age had an inverted U-shaped effect on wages, and marital status had a positive effect. Locality (rural areas) also had a positive impact on wages. Higher education levels were strongly associated with higher wages. Decomposition of the Gini index (Table 5) revealed an overall increase in wage inequality from 2010 to 2020. However, the contribution of gender and education differences to overall wage inequality decreased over time, suggesting that other factors, such as locality (which showed a threefold increase in contribution to inequality from 2010 to 2020), play a more significant role.

The findings partially support the hypothesis that women's higher education reduces gender wage inequality in Palestine. While the gender wage gap persists, it showed a decreasing trend over the study period. The decrease in the contribution of education and gender to overall inequality indicates a more complex picture, with other factors, notably locality, becoming increasingly important contributors to the wage gap. The decreasing wage gap for high and higher education groups suggests that increased access to higher education for women may be contributing to reducing the gender wage gap, though the overall increase in wage inequality points to other factors influencing wage distribution. The higher wages in rural areas likely reflect migration patterns of male workers seeking better opportunities in urban areas or Israel. The persistence of a gender wage gap even with increased female education underscores the need to address systemic issues beyond education, such as occupational segregation and biases in hiring practices.

This study demonstrates a persistent but decreasing gender wage gap in Palestine, with education remaining a significant wage determinant but with a declining contribution to overall inequality. While higher education provides a higher return, other factors such as geographic location (rural vs. urban) exert a greater influence on wage inequality. Policy interventions should focus not only on education but also on addressing systemic issues like occupational segregation and discrimination, creating a more equitable labor market and improving social protection.

The study's limitations include the potential omission of relevant variables (religion, traditions, ethnic background, age at marriage, etc.) from the LFS data. While sensitivity analyses were performed, the lack of data on these variables may affect the interpretation of results. The sample size of women with higher education is relatively small, which could introduce bias. Future research should incorporate additional data to account for these limitations and investigate the complex interaction of social, cultural, and economic factors affecting wage inequality in Palestine.