The political economy of Israeli protectionism: An empirical analysis

Abstract

The aim of this study was to examine the tariff structure in Israel in terms of the four main theoretical models of endogenous commercial policy. The empirical results for levels of protection in Israel support several of the models. In particular the pressure group model performs well and especially the variable that represents the lobbying power of the Histadrut/public sector in Israel. This is consistent with the longstanding political power of the Histadrut in Israel. The Histadrut's role in the Israeli economy rises above the “western” concept of a labor union and takes on a quasi-governmental function. The clearest example of this elevated status is seen when the government included the Histadrut as part of the commission charged with the responsibility of carrying out the “nominal liberalization” process of the 1960s. Evidently it is this kind of political-economic power that allowed the Histadrut to affect the level of protection Histadrut-dominated industries received.