Characteristics and Trends in the Israeli Service Economy

Abstract

Long-term and short-term characteristics of the Israeli service economy are described and analysed. The percentages of service employment in Israel are similar to current ones in developed countries, but a variety of factors make the Israeli case unique. The roots of the Israeli service economy lie in the 1920s when the British established a civil service, while the Jewish population developed the Histadrut, the Jewish Agency, party and municipal services. Meanwhile, the geographical separation between the capital city (Jerusalem), and the largest city (Tel A viv), which became a primate city, encouraged the evolution of services. The constant and very large import of capital, the supply of service-oriented immigrants and the demand for improved health and education services are additional factors. The politicisation of services and bureaucratic activism have a strong impact from a political viewpoint. Altogether, the Israeli service economy has been uniquely structured in an immigration society driven by political rather than economic forces. During the last decade pressures for change have surfaced, due to the development of modern agriculture, manufacturing and domestic consumption. These have increased the finances, insurance and real estate sector, and decreased the dominance of Tel Aviv. The current economic crisis in Israel is interpreted as a crisis of the services.