Discriminated or Not? The Arab Minority in the Israeli Labor Market

In this paper, I investigate whether the higher rate of return to schooling of minorities in Israel could be a result of non-linear discrimination against them in the labor market. By composing the wage gap between Jews and non-Jews (Non-Jews in Israel are mainly Arabs. Therefore, I use the terms non-Jews and Arabs interchangeably) workers separately, for low-educated and high-educated workers, I show that the unexplained share of the gap, which is at least partly due to discrimination, is dramatically reduced in the high-educated composition. It indicates a negative correlation between schooling and discrimination, which means that part of the higher return to education comes from the reduction in discrimination in jobs with higher education requirements.