View
52
Download
0
Category
Preview:
Citation preview
Challenges to the Israeli economy: addressing the symptom or the illness?
Dany Bahar, PhD
2
Israel’s strong economy
3
Israel’s strong economy
4
Strong foundations: R&D as % GDP (2013)
5
But, high inequality among OECD
Icelan
d
Denmar
k
Finlan
d
Belgium
Austria
Luxe
mbour
g
Hunga
ry
Franc
e
Poland
Irelan
dIta
ly
New Z
ealan
d
Portug
al
Spain
United
King
dom
Israe
l
United
Stat
esChil
e
OECD 0.20
0.25
0.30
0.35
0.40
0.45
0.50
Source: OECD Income Distribution Dataset
Gini Coefficient, 2014
6
… as well as relative poverty rate
Icelan
d
Czech
Rep
ublic
Norway
Slovak
Rep
ublic
Netherl
ands
Sweden
Austria
Sloven
ia
Belgium
United
King
dom
Canad
aIta
lyLa
tvia
Greece
Japa
n
Mexico
Turkey
Israe
l0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Relative Income Poverty Rates, 2014
Source: OECD Income Distribution Dataset
7
More bad news…• Child poverty rate is 24.3% (2014),
just behind Turkey • Top 20% earns 7.4X as bottom 20%
» Just behind Chile, Mexico, US and Turkey
» Iceland (#1) 3.4, Ireland 4.8, Italy 5.8, Greece 6.3
• Poverty rates for ultra-orthodox and Arabs are above 50%. For rest of society is ~10%
• What’s behind that? Two reasons…
8
First, highly unequal employment rates…
9
Why this heterogeneity?• State provide different incentives to
different 'tribes’: e.g. child allowances on ultra-orthodox
– Fertility from 2.76 to 5.88 between 1955 and 1980s
– Labor force participation went from 68.3% in 1989 to 43.3% in 2000
– Child poverty in Israel rose from 9.6% to 35.8% between 1979 and 2006.
– Cohen et al. (2013) show a causal relationship between child allowances and fertility rates in Israel
• Some safety nets might play an important role
10
…but getting them to work is not enough
11
The “scale-up” nation? Not quite…• ~1-1.5K startups per year• Not enough jobs: 10.7% of total
employment in 2008 to 8.9% in 2013• Strong incentives to start, but not to
grow: tax incentives only to large exporters
• Integrating labor force to productive firms is key to sustained growth
12
Second, high relative cost of living…
13
…and housing keep rising
14
Highly concentrated markets…
15
… with few imports
16
For example, in food…
17
Red tape in housing markets…
18
Why care about economics?• 60%+ of Israelis think economic
gaps are an existential threat (?!)• New political parties focused on
economic welfare sell themselves as “a-tribal”» Israel should move from a ‘tribe-based’
to ‘income-based’ economic policies» This will help in improving transparency
and reduce corruption
19
Open questions…• Unemployment for all:
» Safety nets -> conditional cash transfers / EITC
» Addressing regulation to scale-up hi-tech firms that’d employ non-engineers; providing engineering ‘boot camps’ to under-employed populations
• Cost of living: address the symptom (i.e. public housing or subsidies) or the illness (i.e. foster competition and supply)?
Recommended