Book contents
- The Israeli Economy, 1995–2017
- The Israeli Economy, 1995–2017
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Preface
- 1 Lights and Shadows in the Market Economy
- Part I Government Policy and Macroeconomic Developments
- Part II Reforms and Their Effects
- Part III Investment in Human Capital, Productivity, and Inequality
- 11 Why Is Labor Productivity in Israel So Low?
- 12 Income Inequality in Israel: A Distinctive Evolution
- 13 The Israeli Labor Market, 1995–2015
- 14 Economics of Education in Israel
- 15 Economic Aspects of the Healthcare System in Israel
- 16 The Arab Economy in Israel
- Part IV Key Issues in Various Sectors
- Index
- References
11 - Why Is Labor Productivity in Israel So Low?
from Part III - Investment in Human Capital, Productivity, and Inequality
Published online by Cambridge University Press: 04 February 2021
Book contents
- The Israeli Economy, 1995–2017
- The Israeli Economy, 1995–2017
- Copyright page
- Contents
- Figures
- Tables
- Contributors
- Preface
- 1 Lights and Shadows in the Market Economy
- Part I Government Policy and Macroeconomic Developments
- Part II Reforms and Their Effects
- Part III Investment in Human Capital, Productivity, and Inequality
- 11 Why Is Labor Productivity in Israel So Low?
- 12 Income Inequality in Israel: A Distinctive Evolution
- 13 The Israeli Labor Market, 1995–2015
- 14 Economics of Education in Israel
- 15 Economic Aspects of the Healthcare System in Israel
- 16 The Arab Economy in Israel
- Part IV Key Issues in Various Sectors
- Index
- References
Summary
We analyze differences in labor productivity between Israel and a group of small OECD countries. We assume a more general human capital production function and calibrate it using PIAAC surveys, which examine the literacy and numeracy skills of the adult population in the OECD countries. Whereas Israel has more years of schooling, its population has lower measured skills. Using development accounting exercise, we show that once years of schooling and numeracy skills are taken into account, differences in accumulated factors explain more than three-quarters of the gap. This is against a split of 60–40 between accumulated factors and total factor productivity, when these skills are ignored. Additionally, using panel data on 13 OECD countries, we show strong positive correlation between physical and human capital per worker. A causal interpretation of our estimates implies that closing the gap in skills will indirectly close 18 percent of the gap in physical capital.
- Type
- Chapter
- Information
- The Israeli Economy, 1995–2017Light and Shadow in a Market Economy, pp. 329 - 361Publisher: Cambridge University PressPrint publication year: 2021
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