Returns to education and annual income gaps updated in Israel: a quantile regression approach

The study intends to provide some updated empirical evidences on Israel education returns through quantile regression based on the cross-section individual survey data collected in 2009. We analyse gender and ethnicity differentials in the returns to education by using the standard Mincerian earnings equation separately. We obtain estimates displaying higher education returns at the higher quantile and lowest income in lowest quantile. Meanwhile, we use the Oaxaca decomposition to break down the total annual income gap into an explained term due to differences in endowments and an unexplained term due to the discrimination to explore the differences among genders and ethnicities. We find clear evidence that the unexplained annual income differential is higher in upper quantiles of the conditional annual income distribution than in lower quantiles. In order to eliminate the discrimination gap and keep the economy develop sustainably, the identification with different cultures and stratums in Israel must be improved.