Advances in Management and Applied Economics

Productivity Growth and Technological Progress in the Palestinian Economy: Empirical Evidence from the West Bank

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  • Abstract

    This study investigates firm-level productivity to identify factors determining the level of total factor productivity (TFP) for firms in the West Bank. By using a sample of 129 enterprises, the Cobb-Douglas production function and the TFP equation are estimated. Results suggest the accumulation of human capital and adoption of innovative management are determining factors associate with higher TFP for firms in the West Bank. The limited access to export market under the asymmetric trade relation with Israel has a negative impact on technological progress. Owing to the scarcity of multinational enterprises, domestic firms in the West Bank are deprived of the benefits of the spillover effects of technological transfer. While the human capital accumulation is significant, the increasing wage levels of Palestinian workers due to the continuous migration to the Israeli labor market may have a negative impact by eroding the competitiveness of domestic firms in the West Bank.