This chapter provides a comprehensive framework to understand and quantify structural bottlenecks in a setting of multidimensional sustainable development. First, we formalise the idea of an idiosyncratic bottleneck when thinking in a hypothetical situation where a government has all the necessary resources to guarantee the success of its existing programmes (i.e., the budgetary frontier). Second, we compare the development gaps between the baseline and counterfactual outputs to assess how sensitive are the different indicators when they operate at the budgetary frontier. Third, we combine this information with the historical performance of indicators to develop a methodology that identifies idiosyncratic bottlenecks. Finally, we elaborate on a flagging system to differentiate between idiosyncratic bottlenecks according to the ‘urgency’ to unblock them.

This chapter studies the feasibility of the SDGs to improve our understanding of the empirical link between government expenditure and development outcomes. First, we explain the strategy to produce prospective (counterfactual or otherwise) analyses with the computational model and two metrics to evaluate advances in development gaps. Second, we present simulation results showing the development gaps by 2030 when the historical budget, in real terms, is preserved during the remaining years of the current decade. Third, we conduct sensitivity analyses that involve changes in the overall budget size that modify the value observed at the historical period used for calibration. Fourth, we present some reflections on the results.

The introduction summarizes some of the main issues and findings covered in the book. The first section relates this volume to its two predecessors, arguing that while the last two decades signaled the fulfillment of many of the hopes raised in the previous volumes, the economy still suffers from many of the maladies highlighted in them, including low levels of productivity and high levels of inequality. Section 1.2 is concerned with the background to local economic developments, including the massive immigration wave of the 1990s and fluctuations in the conflict with the Palestinians and in the global economy. Section 1.3 discusses the reduction in government expenditures and taxes and the reaction of monetary policy to the global financial crisis. Section 1.4 summarizes the main structural reforms aiming to reduce government intervention and increase business sector competition, as well as the attempt to reduce economy-wide concentration. Section 1.5 focuses on economic growth and its determinants: changes in employment, physical and human capital, and productivity. The final section highlights two issues: (a) the improvement of Israel’s level of economic freedom and its position relative to other rich countries and (b) the increase of inequality in income and the deterioration of social services.

In Chapter 12, we explain the course of public policy – specifically, the degree to which governments intervene in citizens’ social and economic affairs. We argue that scale is negatively related to the level of government intervention through decreased social cohesion, representativeness and trust, particularism, and concentration, and through increased economies of scale. We also discuss the role of trade dependence, which we argue likely has ambivalent (countervailing) effects on intervention. In the empirical section, we turn to a variety of empirical terrains including the growth of the American state, the experience of small states (everywhere), and four policy realms – moral, fiscal, personnel, and social. Our results point to a stark contrast between subnational and national-level analyses. While subnational analyses show either a negative relationship between scale and intervention, or no relationship at all, national-level analyses show a strong (negative) relationship between the size of communities and the size of government. This apparent paradox has many possible answers, and so we leave it for future research to tease apart which factor(s) might be responsible.

This chapter considers whether there is a trade-off between growth and equality, as economists sometimes assert, differentiating between vertical inequality (among individuals) and horizontal inequality (among groups). Most evidence challenges the supposed trade-off, suggesting greater equality increases growth, especially sustained growth. Inequality among individuals tends to limit human resources, while inequality among groups can lead to violent conflict, and both constrain growth. Greater equality also supports other desirable objectives, including better nutrition, less crime, and better health. The impact of growth on equality is analysed. This depends on how far earnings are spread via employment; and the redistributionary effects of tax and government expenditure. Labour-intensive activities tend to improve distribution, while capital-intensive ones, heavy reliance on minerals for exports and rising skill requirements tend to worsen it. For horizontal inequality, the impact of growth varies according to group location, economic specialization and policies, illustrated by the experience of Ghana, Peru, Malaysia and Northern Ireland. The chapter surveys policies likely to improve vertical and horizontal distribution, with examples drawn from many countries. Finally, the chapter considers the political conditions needed to support equalising policies.

This chapter considers whether there is a trade-off between growth and equality, as economists sometimes assert, differentiating between vertical inequality (among individuals) and horizontal inequality (among groups). Most evidence challenges the supposed trade-off, suggesting greater equality increases growth, especially sustained growth. Inequality among individuals tends to limit human resources, while inequality among groups can lead to violent conflict, and both constrain growth. Greater equality also supports other desirable objectives, including better nutrition, less crime, and better health. The impact of growth on equality is analysed. This depends on how far earnings are spread via employment; and the redistributionary effects of tax and government expenditure. Labour-intensive activities tend to improve distribution, while capital-intensive ones, heavy reliance on minerals for exports and rising skill requirements tend to worsen it. For horizontal inequality, the impact of growth varies according to group location, economic specialization and policies, illustrated by the experience of Ghana, Peru, Malaysia and Northern Ireland. The chapter surveys policies likely to improve vertical and horizontal distribution, with examples drawn from many countries. Finally, the chapter considers the political conditions needed to support equalising policies.