Israeli Economy Research Articles

""<br>(Why Israel Should Adopt the Uncitral Model Law on International Commercial Arbitration)

תקציר בעברית: מאמר זה מצביע על פרדוקס: למרות שישראל הינה מדינה המעורה מאד במסחר הבינלאומי, ולמרות שבוררות היא הדרך המועדפת בקהילת העסקים לפתרון סכסוכים מסחריים בינלאומיים, בפועל מתקיימות מעט מאד בוררויות בינלאומיות בישראל. התשובה לפרדוקס טמונה לדעת המחבר בעובדה שלמדינת ישראל יש חוק בוררות מיושן, הסובל ממספר פגמים מרכזיים, אבל בעיקר בעובדה שהוא חוק אידיוסינקרטי שאינו מוכר למשפטנים זרים. לפיכך מציע המחבר לאמץ את החוק לדוגמה של האום לבוררות מסחרית בינלאומית (UNCITRAL Model Law on International Commercial Arbitration). המאמר מראה כי חוק זה, המותאם במיוחד לצרכים של הבוררות המסחרית הבינלאומית, נהנה ממוניטין בינלאומי ויכול לסייע רבות בלהפוך את מדינת ישראל ליעד אטרקטיבי יותר לבוררויות בינלאומיות. המחבר מצביע על הבעיות שמהן סובל חוק הבוררות שלנו ומראה שבעיות אלו נפתרו בחוק לדוגמה ושאימוצו יתרום לשיפור וייעול של הליכי הבוררות בישראל ולהגשמת רצון הצדדים. כמו כן, הוא טוען שמעצם העובדה שחוק זה מוכר בקהילת המשפטנים בעולם העוסקים במשפט מסחרי ובבוררות בינלאומית- בהיותו מאומץ בקרוב למאה מדינות בעולם - יהיה באימוצו כדי להפוך את ישראל לשיטת משפט מוכרת לקהילה זו. המאמר גם מראה את היתרונות שיצמחו לכלכלה הישראלית ולעורכי-הדין בישראל מכך שיותר בוררויות בינלאומיות יתקיימו כאן. מדינות רבות אימצו את החוק לדוגמה לכל סוגי הבוררויות – הן בינלאומיות והן מקומיות – ובחלקו האחרון עוסק המאמר בשאלה אם כדאי גם לישראל לעשות כך. לאחר העלאת היתרונות והחסרונות של שתי האפשרויות, נוטה המחבר להמליץ על אימוצו לבוררויות בינלאומיות בלבד, תוך הכנסת תיקונים נדרשים מסוימים גם לתוך חוק הבוררות הקיים, אשר ימשיך לחול על בוררויות מקומיות. English Abstract: This article points to a paradox: Despite the fact that Israel is deeply involved in international commerce, and although arbitration is the most common way to resolve international business disputes, very few international commercial arbitrations are seated in Israel. The explanation to this paradox, in the author’s view, is that Israel has an outdated arbitration law that suffers from several flaws, and in particular, that it is an idiosyncratic law with which foreign lawyers are not familiar. Therefore, the article suggests that Israel should adopt the UNCITRAL Model Law on International Commercial Arbitration. It argues that the Model Law enjoys an excellent reputation within the international arbitration community and can help much in making Israel a more attractive seat for international arbitrations. The author points to the flaws of Israel’s existing arbitration law and shows how the Model Law has fixed these flaws. He also argues that since the Model Law is well known among the world’s international business and arbitration lawyers – having been adopted in almost one hundred different jurisdictions in the world – by adopting it, Israel can turn its arbitration law into a familiar legal system for those lawyers. The article also points to the benefits that will accrue to the Israeli economy and to Israeli lawyers from the increase in the number of international arbitrations seated in Israel. Many countries have adopted the Model Law for both international and domestic arbitration, so in its last chapter, the article deals with the question of whether Israel should do the same. After raising the pros and cons of the two options in this regards, the author leans towards the option of adopting the Model Law only for international commercial arbitrations, while making necessary amendments to the existing law, which will continue to apply to domestic arbitrations.

The political economy of Israel's ‘social justice’ protests: a class and generational analysis

In the summer of 2011, similar to and partly inspired by Spain's 15M (indignados) movement, Israel experienced an unprecedented wave of socio-economic protest featuring tent encampments and mass rallies. Headlined ‘the people demand social justice’, the protest was surprising since distributive conflicts and social policy issues are peripheral to Israeli politics, and Israel was not in the throes of an economic crisis. These were not anti-austerity protests, but reflected the eroding life chances of young adults. Specifically, liberalisation of Israel's political economy – which contributed to a substantial rise in the living standards of the parental generation of the middle class and improved their life chances in the 1990s – is now impeding inter-generational class reproduction for their children. We document significant changes in home ownership, relative incomes, and the value of higher education and other assets that were previously the key to middle class incomes and lifestyles. The impact of neo-liberal policies is evident, for instance, in the declining scope and generosity of the public sector's role in employment and housing. At the subjective level, on the eve of the protests young adults with higher education were less optimistic about their economic prospects than other groups. Finally, even though the protests appeared to be broadly consensual and inclusive, a closer look reveals that its core supporters and activists were drawn from social and political sectors closely associated with the middle class.

The Economy of Israel from the Foundation of the State through the Twenty-First Century.. By Paul Rivlin. New York: Cambridge University Press. 2011. Pp. xvi, 288. $90.00, hardcover; $31.99, paper.

The Economy of Israel from the Foundation of the State through the Twenty-First Century.. By Paul Rivlin. New York: Cambridge University Press. 2011. Pp. xvi, 288. $90.00, hardcover; $31.99, paper.

Defence, innovation and development: the case of Israel

The overall consensus in the macro literature is that military expenditure reduces economic growth, except for some exceptional circumstances and countries, if all inter-relationships are adequately accounted for. However, defence also has major spin-offs particularly for economies with a relatively large Defence Industrial Base, DIB (also known as the defence industrial and technological base) which could have potential positive externalities for the civilian sectors in terms of scientific innovation and technological progress. In this paper we concentrate on economic growth and its links with the defence sector. It makes reference to the Israeli economy and military with special emphasis on the military industrial complex.JEL Codes: E32, G38, P43

Inter‐sector water allocation in Israel, 2011–2050: urban consumption versus farm usage

AbstractAccording to the Water Authority of Israel, Israel's water economy is on the brink of a crisis. Demands are increasing, exceeding the capacity of the natural sources, which are being depleted. Water, as a resource in short supply, necessitated administrative actions in order to attain its efficient utilization, in accordance with the goals set by the state. In addition, the issue of water allocation in Israel is strongly connected to internal politics and not necessarily to a clear overall policy. This article presents a simulation model which examined a large number of different scenarios and returns the possible outcomes of water allocations in a routine situation of uncertainty. The findings show that even under ideal conditions, a water shortage in Israel is inevitable and urban consumption will demand the largest allocation of water. As a result, the Israeli rural sector will be required to reorganize the water allocation system and production structure.

MOISE: A DSGE Model for the Israeli Economy

This paper presents a medium-scale micro-founded model with real and nominal imperfections, named MOISE (MOdel for the ISraeli Economy). The model was developed at the Bank of Israel to support monetary policy formulation, and builds on similar models in wide use among central banks. It includes extensions and modifications that reflect the special characteristics of the Israeli economy and are intended to improve the model's fit to Israeli data. The model was estimated using the increasingly popular Bayesian approach, using Israeli data for 1992:Q1 to 2009:Q4. The model's fit was tested using two criteria: the moments' fit and in-sample forecast performance. Finally, the paper presents and analyzes the model's properties using impulse response functions and variance decomposition.

The work and its meaning among Jews and Muslims according to religiosity degree

PurposeThe purpose of this paper is to examine and compare the meaning of work (MOW) according to religiosity among Jews and Muslims in Israel. The paper attempts to explain the similarities and the differences between the two ethno‐religious groups.Design/methodology/approachIn 2006 the MOW questionnaire was conducted on 1,464 working respondents and the final sample included 898 Jews and 215 Muslims, representing the labor force. The MOW dimensions were: work centrality, intrinsic orientation, economic orientation and interpersonal relations.FindingsWhile among Jews, religiosity degree affected all four dimensions of the MOW, there were no differences among Muslims with a different religiosity degree concerning all MOW dimensions, except for the economic orientation. Furthermore, among Muslims when religiosity is controlled, the other demographic variables do not influence the MOW domination.Practical implicationsThis additional knowledge of the relationship between religion, religiosity and the MOW, can help to better understand the employee's needs and how to fulfil them (e.g. implementing “Diversity Management” programs). This suitability will eventually lead to more desirable work outcomes.Social implicationsGovernmental policy can lead to higher participation of orthodox Jews in the labor market. Moreover, the extra‐high work centrality among Arab Muslims reflects a high non‐actualized potential for organizations and for the Israeli economy in general.Originality/valueThere are no studies that compared work values of Jews and Muslims according to religiosity, in and out of Israel, and this paper explores the MOW of the ethno‐religious groups in Israel and the causes for the different patterns.

Elite Philanthropy in Israel

The paper presents the findings of a study on elite philanthropy in Israel. The study aimed to describe and analyze the scope of elite philanthropy, which has been affected by the growth and relative stability of the Israeli economy. The study also aimed to shed light on the demographic characteristics of elite philanthropists, their motives for giving, preferred target populations and areas of interest for donations, the value of donations, and the channels and mechanisms through which donations are made. The findings revealed that the average percentage of donations out of the philanthropists’ total earnings was not lower than the percentage found among philanthropists in other Western countries. In the paper, we clarify the meaning of elite philanthropy in the context of Israeli society and the role of elite philanthropists in promoting social programs. We discuss the philanthropists’ sense of obligation to “give back” to the society which enabled them to become wealthy.

The Israeli economy from the foundation of the state through the 21st century

The Israeli economy from the foundation of the state through the 21st century

Developments in the residential energy sector in Israel

This work discusses the developments of the energy economy of Israel over the past two decades. On the one hand, the main phenomenon in Israel, as well as in most European Mediterranean countries, is the great increase in the use of air-conditioning, which has evolved from being marginal and concentrated in office buildings to being commonplace and used in the majority of the residential sector. On the other hand, there is a concerted effort to promote green (environmentally friendly, with energy conservation a large part) buildings both in the public and private sectors, with various degrees of success. There is a parallel effort to promote renewable energy sources.

Dancing as fast as they can: Israeli high‐tech firms and the Great Recession of 2008

AbstractThis article shows that the Israeli economy weathered the Great Recession of 2008 rather well. Macroeconomic data show that Israel, with international trade that is highly dependent upon small, high‐tech multinationals, increased its outgoing foreign direct investment (FDI), outgoing greenfield investments, and exports during 2008 and attained good results compared to the European Union and the United States. The explanation offered is based on the predominance of high‐tech, born global companies and small high‐tech multinationals in Israel. Business strategies based on (1) size and flexibility, (2) focusing and tailoring, and (3) innovativeness and globalization allowed many of Israel's small, high‐tech multinationals to continue growing and attain their goals despite the Great Recession of 2008. Five case studies are presented to exemplify this argument. The continuing success of the high‐tech sector and its contribution to Israel's economy explains, among other things, why Israel was relatively unaffected by the crisis. © 2011 Wiley Periodicals, Inc.

Rights Issues and their Impact on Diluting Minority Rights in Israel

The Israeli economy is a small, centralized economy, in which most of it public traded companies have an absolute controlling core. Therefore, it is increasingly important to understand the parameters that influence the results of rights issues and whether they usually lead to a significant “expropriation” of minority rights. The literature, which describes the agency problem inherent in rights issues at length, does not include an abundance of empirical studies on the impact of rights issues on minority rights. To the best of our knowledge, this is the first study that examines the impact of rights issues, the dilution of minority holdings and various factors’ influence on the intensity of the dilution in a developed country. The significance of the main parameters and their impact on the dilution result support the accepted opinion in the economic literature, which casts a negative light on rights issues as an instrument that leads to the dilution of minority rights.

Cross-Industry Consequences of Terrorism

Given the growing importance of terrorism in today’s world, it is essential to understand its impact on the global economy. This paper examines the case of Israel to consider the impact of this phenomenon on the nation’s economy. Specifically, it will aim to determine whether the Israeli financial market is sensitive to terror attack, how sensitive are the various sectors of the Israeli financial markets and whether sectors react differently from one another. This study considered various financial indices to assess the impact of the amount of fatal and non-fatal terrorism-related daily casualties and the amounts of daily cumulated terror events on industries’ unit-root free daily returns. In this time series analysis, the variables were run through an Orthogonalisation process to prevent multicolinearity and the time series filtered to remove economic and global trends. The statistical analysis methods comprise of Multi-Variables Linear Regression, Seemingly Unrelated Regression and Spearman ranking test. The results of this study reveal that the Israeli financial market and all its sectors do suffer from terrorism (-25 percent cumulated loss for TA100). Industries dependent on domestic demand tend to react stronger to terror attacks than those based on exports with the exception of the housing industry. From a statistical point of view, the hypothesis of similar reaction of all sectors of the Israeli economy could not be rejected. The results of this study apply to a vast array of countries thanks to Israel’s level of development and free market. An interview was also done with an expert who confirmed most of the theoretical results. The main weaknesses of the study are that the orthogonalisation process biased the weight of the terror data variable and the time series/daily return perspective does not match a certain long-term reality of terrorism. The majority of results match those of previous studies and complete the perspective on the consequences of terrorist conflicts. The process of filtering the time series and variables to remove undesirable data employed in this study is to the author’s knowledge novel to this specific area of academic research.

Israel's energy security: the Caspian Sea and the Middle East

The Israeli economy is the most developed in the Middle East. In order to maintain the high standards of living, the Israeli economy needs uninterrupted and secure energy supplies. The country, however, lacks adequate indigenous energy resources. This study examines energy cooperation between Israel and Iran prior to the 1979 Revolution and between Jerusalem and Cairo since the early 1980s. It also analyzes the growing energy partnership between Israel and the Caspian Sea region. It argues that cooperation in energy can enhance strategic cooperation.

Analysis of the Impact of Globalization on the Palestinian Economy

The Palestinian economy is highly dependent on the Israeli economy. With the impact of economic globalization,the Palestinian economy can not develop independently. Palestinian blindly followed free-market economicpolicies resulting in many problems, such as the serious reflux of the Palestinian social funds, the improperinvestment direction, abnormal structure, subject to the Israeli economy and increasingly sharp polarization andcorruption.

Power and the Ascendance of New Economic Policy Ideas: Lessons from the 1980s Crisis in Israel

Recent explanations of transformations of macroeconomic policy under crisis conditions spotlight the intrinsic properties of ideas and the persuasiveness with which they are marketed. Bridging the divide between power and discourse approaches, this article reveals the causal role played by the power resources of expert ideational entrepreneurs, conditional on the political conjuncture in which they operate. The authors exploit a fortuitous natural experiment from the early 1980s, when the Israeli economy spiraled into hyperinflation. Two similar proposals for economic stabilization and reform were offered by different teams of economists, less than two years apart. While the government rejected the dollarization plan, its authorization of the stabilization plan inaugurated a new political-economic regime. This case, in which similar programs were advocated by different ideational entrepreneurs in a largely stable institutional and economic context, makes it possible to pinpoint why radically new ideas succeed or fail. Previously underutilized analytical tools are employed to conceptualize the power of idea carriers, at both the individual and the group level.

Is the Israeli economy controlled by a tiny group of common interest members?

PurposeThe purpose of this paper is to illustrate the centralization of control in the Israeli economy.Design/methodology/approachThe paper uses data published by the Israeli stock market authority to identify owners holding more then 5 percent of a company's value.FindingsThe total worth of stocks traded in the Tel‐Aviv stock exchange was 690 billion shekels (about 180 billion current US dollars), while the worth of the 25 largest companies was about 479 billion shekels (69.4 percent). The party of interest holdings share in these companies was 35.2 percent (while the public share was 64.8 percent).Practical implicationsIn order to reach economic efficiency, we are willing to pay the social cost of unequal income distribution. There is no reason not to use the same logic regarding the taxing of inheritance. If it is more economically efficient, inheritance should be taxed, although it has already been taxed in the past.Social implicationsHow can we improve income distribution without levying taxes that reduce economic efficiency? The answer is high taxes on inheritance.Originality/valueThe paper suggests a practical policy to reduce inequality in Israel.

Jewish Law in Transition: How Economic Forces Overcame the Prohibition against Lending on Interest (review)

Reviewed by: Jewish Law in Transition: How Economic Forces Overcame the Prohibition against Lending on Interest Peter J. Haas Jewish Law in Transition: How Economic Forces Overcame the Prohibition against Lending on Interest, by Hillel Gamoran. Cincinnati: Alumni Series of the Hebrew Union College Press, 2008. 196 pp. $35.00. The book, as the title indicates, is an attempt to understand how the biblical prohibition against lending on interest to fellow Jews was changed in the rabbinic period. As Rabbi Gamoran himself puts it in his introduction, "This book recounts how a biblical law, clear, simple, and direct, became engulfed in controversy over the centuries" (p. 3). The basic premise is that as Jews left the biblical period it was clear that the outright ban on interest, meant originally to protect the poor, would have made Jewish business dealings impossible. So, through "inventive interpretation," the law forbidding usury was essentially annulled. The book's organization is simple and direct. The first chapter looks at the basic prohibition as stated in the books of Exodus, Leviticus, and Deuteronomy. The rest of the book focuses on five areas of financing that could potentially violate the ban on usury: loans of produce, advance payments, buying on credit, mortgages, and investments. Chapter Two looks at how each of these practices was redefined in the Talmudic period first by the Tannaim and then by the Amoraim. The next five chapters take up each of these themes in turn and trace its treatment under the Geonim (650-1050 CE), the Rishonim (sages from 1050 CE to about 1500 CE), and the Aharonim (sages from roughly 1500 CE to the present). The biblical material is treated in fairly rudimentary fashion. The three statements of this law that form the focus of the chapter are understood to apply to Israelites offering loans to their fellow Israelites. This, Gamoran notes, is different from what we find in other Ancient Near Eastern texts that deal with business law (Hammurabi, for example). This is so, Gamoran, posits, because of the unique background of the Israelites as a slave people and because of the community's relatively primitive organization once in the land of Canaan. The paramount concern of the framers of biblical law, posits Gamoran, was protection [End Page 172] of the poor, not nurturing business. While Gamoran's fairly idealistic view of biblical Israel's economy may have been somewhat true during the time of the judges, it certainly does not follow that this was true hundreds of years later when Deuteronomy records this law. In fact, Israel and Judah seem to have been extensively involved in trade and other business activities. Gamoran does not explore the economic contexts of the various biblical communities over time. Rather, he treats biblical Israel, and so biblical law, as a monolithic and unchanging whole. The second chapter looks first at the Tannaim (authorities of the Mishnah, redacted in the middle of the second century CE) and then at the Amoraim (authorities of the Talmud, from mid-third to mid-seventh centuries CE). The Tannaim, according to Gamoran, tried to apply the biblical prohibition to their new economic reality, dealing with any loophole they could find that might lead to the taking of interest. At the same time, however, seeing that such stringency was counter-productive, these same authorities found themselves forced to create occasional exceptions to their own rulings. Faced with this confused legacy, the Amoraim, who completed the Talmud, routinely chose the lenient position. In each area under investigation, Gamoran shows, the Amoraim found ways to create a more "business friendly" environment. The remaining chapters consist of a glancing look at post-Talmudic halachic resources, mostly responsa (rabbinic rescripts). There is some brief description of changes in the larger economic framework in which the Jews lived, some acknowledgement of differences in prevailing economic practices in diverse places (Provence vs Spain vs Germany, for example), and the occasional reference to the personality or situation of an individual writer. But for the most part these contextual issues of economic and fiscal theory; notions of money, value, and worth; the legal status of Jews; and the structure of trade relationships between different regions are rarely...

Coupling tourism development and agricultural processes in a dynamic environment

The role of agriculture in the Israeli economy has been declining, and a combination of essential trends has resulted in the emergence of tourism as alternative sources of economic growth in rural areas. These changes have created a new situation, in which tourism-related developments in the rural areas of Israel have become part of the activities of many farm owners. Thus, the Israeli rural environment is a single, tightly coupled system and should be analysed as such. The growth of rural tourism in the Israeli agricultural sector raises several questions, addressing whether rural tourism and farming are synergetic, and the effects of tight coupling between tourism development and agricultural processes. This article presents a simulation model of the coupling effects in which tourism development and agricultural processes are tightly coupled. Our model examined large numbers of different scenarios and the possible outcomes of a decision the farm owner takes in a routine situation of uncertainty. A typical Israeli farm owner embarks on tourism development activities mainly because of stress. Our model shows that adding tourism activities does not increase profit dramatically, but it does increase the variance of profit, which means greater exposure to risks.

The Economic Factors of Palestinian Al-Aqsa Uprising

Israel controlled the main productive factors in the West Bank of Jordan River and Gaza Strip. The Palestinian self-government had to dependence on the Israeli economy. At the same time Israel implemented sanctions on the Palestinian self-government which increased the economic pressures at the same time. Israeli controlling made the Palestinian domestic market become narrower. These economic factors changed Gaza into a hotbed of anti-Israeli struggle.