Decomposing Wage Gaps Between Ethnic Groups: The Case of Israel

Abstract

Past investigations of the income gaps between Jews and non-Jews in Israel treat non-Jews as one group. In this paper we separate the non-Jewish group into three main religious minorities: Muslims, Christians and Druze and focus on the northern part of Israel, where most minorities live. Using the latest Israeli census, we find significant explained and unexplained income gaps in favor of Jews. The unexplained gaps tend to be larger the more educated the individual. Jews have much higher representation in the more lucrative occupations, and earn significantly more in them. In almost every dimension Muslims suffer from the largest income gaps. Druze, on the other hand, enjoy the lowest income gaps across most of the income distribution, due in large part to direct and indirect benefits they reap from serving in the army. Among minorities, Christians are the most educated and most concentrated in the top occupations, which explains why they enjoy the lowest gaps in the highest percentiles of the income distribution.