An authoritative economic history of Israel from its founding to the presentIn 1922, there were ninety thousand Jews in Palestine, a small country in a poor and volatile region. Today, Israel has a population of nine million and is one of the richest countries in the world. The Israeli Economy tells the story of this remarkable transformation, shedding critical new light on Israel's rapid economic growth.Joseph Zeira takes readers from those early days to today, describing how Israel's economic development occurred amid intense fighting with the Palestinians and neighboring Arab countries. He reveals how the new state's astonishing growth continued into the early 1970s, and traces this growth to public investment in education and to large foreign transfers. Zeira analyzes the costs of the Arab-Israeli conflict, demonstrating how economic output could be vastly greater with a comprehensive peace. He discusses how Israel went through intensive neoliberal economic policies in recent decades, and shows how these policies not only failed to enhance economic performance, but led to significant social inequality.Based on more than two decades of groundbreaking research, The Israeli Economy is an in-depth survey of a modern economy that has experienced rapid growth, wars, immigration waves, and other significant shocks. It thus offers important lessons for nations around the world.

• Cover
• Contents
• Preface
• Acknowledgments
• 1. Historical Background
  • Jewish Immigration: Description
  • Jewish Immigration: Characteristics
  • The Israeli-Arab Conflict: The Beginning
  • The Main Eruptions of the Conflict
  • Changes in the Type and Intensity of the Conflict
  • Building a New Nation
  • Success and Its Costs
• PART I. THE ISRAELI GROWTH MIRACLE
  • 2. Catching Up: The Rapid Growth of 1922–1972
    • What Is Economic Growth and How Do We Measure It?
    • Global Economic Growth
    • Economic Growth in Israel over the Years
    • Comparing Economic Growth in Israel to Growth in Other Countries
    • Structural Changes
    • Growth of Factors of Production
    • Summary
  • 3. Explaining Israeli Economic Growth
    • How Do We Explain Economic Growth?
    • Labor Growth and Capital Deepening
    • The Solow Residual
    • Total Factor Productivity and Its Effects
    • Human Capital
    • Adding the Kuznets Effect to Human Capital
    • Technical Progress
    • Summary: Productivity, Human Capital, and Technical Progress
  • 4. High-Tech, High Fertility, and Missing Capital
    • Recent Developments
    • The High-Tech Sector: Progress and Scale
    • The High-Tech Sector: A Miracle or Public Education?
    • Discovering Gas in the Mediterranean
    • High Fertility in Israel
    • Why Is Labor Productivity in Israel So Low?
    • The Good News and the Bad News
  • Lessons from Part I
• PART II. THE ISRAELI-ARAB CONFLICT
  • 5. The Conflict and the Fiscal Roller Coaster
    • Direct Military Expenditures over the Years
    • The Fiscal Roller Coaster
    • The Fiscal Crisis and the Rise of Defense Costs
    • The Rise of Other Expenditures
    • It’s the Conflict . . .
    • Peace with Egypt and the End of the Fiscal Crisis
    • Summary: The Wide Conflict and Its Fiscal Cost
  • 6. Additional Costs of the Conflict
    • The Conflict between Outbreaks
    • Conscription and Loss of Human Capital
    • Summary of Costs
    • Costs of the Conflict That Are Hard to Estimate
    • Are There Economic Benefits to the Conflict?
    • War and Peace: An Economic View
  • Lessons from Part II
• PART III. ECONOMIC LESSONS FROM A TURBULENT HISTORY
  • 7. Business Cycles in Israel
    • Business Cycles and Their Causes
    • First Identification by GDP Growth and Unemployment
    • A Closer Look at Each Recession
    • Idiosyncratic Business Cycles
    • Peace with Egypt and the Change in Business Cycles
    • The Dynamics of Unemployment
    • Fiscal Policy: Counter-or Pro-Cyclical?
    • Why Israel Had Fewer and Milder Recessions than Other Countries?
  • 8. The Balance of Payments: From Deficit to Surplus
    • International Trade and the Balance of Payments
    • The Balance of Payments in Israel over the Years
    • The Intertemporal Approach to the Balance of Payments
    • The Trade Deficit and Its Causes: Growth, War, Immigration, and Transfers
    • Some Comments on Applying the Theory to Israel
    • Immigration from the Ex-Soviet Union and the Trade Deficit
    • The Composition of International Trade
    • Reality and Economic Theory Can Match
  • 9. High Inflation in Israel
    • Inflation as a Tax
    • The Rise and Decline of Inflation in Israel
    • The Theory of Inflation Tax
    • Explaining the First Step of Inflation
    • Explaining the Second Step of Inflation
    • Explaining the Third Step of Inflation
    • Stabilization in 1985
    • Summary
  • 10. Monetary Policy and Its Costs
    • The Long Disinflation
    • The Phillips Curve
    • Two Episodes of Unemployment
    • Inflation Targeting in Israel
    • The Independence of the Central Bank
    • Commercial Banks and Financial Intermediation in Israel
    • The Role of Monetary Policy in Israel
  • Lessons from Part III
• PART IV. NEOLIBERALISM AND ITS IMPACTS
  • 11. Between Intervention and Markets
    • Left and Right, Socialism and Capitalism
    • Public and Private Ownership in the 1950s
    • Public and Private Ownership after 1960
    • Privatizing Public Companies
    • Protection versus Openness
    • Israel’s Trade Policies
    • Liberalizing Other Markets
    • The Tragedy of the Labor Movement
  • 12. The Public Sector since 1985
    • The Measure of Public Expenditures
    • The Global Rise of Public Sectors in the Twentieth Century
    • The Decline of Public Spending since 1980
    • The Decline of the Public Sector: The Policy and the Rule
    • The Reduction of Taxes
    • More on the Public Sector
    • The Diet of the Fat Man
    • Privatization of Public Services
    • Economists or Politicians?
  • 13. Inequality
    • Inequality: Between the Labor Market and the Government
    • The Factor Distribution of Income
    • Why Has the Share of Labor Declined?
    • Income Gaps between Workers: Education
    • Women, Arabs, Mizrahi Jews and the Ultra-Orthodox
    • Market and Disposable Income: The Effect of Government
    • The Two Hands of the Government
  • Lessons from Part IV
• Conclusion: Four Decisions, Two Dilemmas, and One Pandemic
• Appendixes
  • 1. Labor-Augmenting Total Factor Productivity
  • 2. Human Capital
  • 3. Capital-Output Ratio and Labor Productivity
  • 4. Dynamic Tests of Rates of Unemployment
  • 5. Empirical Tests of the Balance of Payments in Israel
  • 6. Inflation Tax
  • 7. The Phillips Curve
  • 8. The Dynamics of Public Debt-to-GDP Ratio
  • 9. Wage Regressions
• References
• Index