Israel: Selected Issues
IMF Staff Country Reports, September 16, 2015
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Bibliographic details
- Published: September 16, 2015
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513594675.002
Summary and main findings
- The paper examines labor productivity in Israel.
- Israel’s GDP per capita is low relative to the United States despite high labor input, as labor productivity is low.
- Catch-up of labor productivity to the United States stopped in the 1980s and relative labor productivity has since declined.
- Low labor productivity is the result of:
- a low capital-to-labor ratio—kept low by high employment growth, and
- low total factor productivity growth.
- Low total factor productivity growth may reflect lack of competition and product market restrictions, which are among the highest in advanced economies.
Analysis of drivers
- Capital-to-labor ratio
- Characterized as low, constrained by high employment growth.
- Total factor productivity (TFP)
- TFP growth described as low.
- Weak TFP growth is linked to structural features of product markets: lack of competition and high product-market restrictions.
- Historical dynamics
- The period of catch-up in labor productivity relative to the United States ended in the 1980s; relative labor productivity declined since then.
Policy recommendations
- Boost competition.
- Lower product-market restrictions.
- Improve the quality of education.
- Improve infrastructure.
- These measures are identified as would help boost productivity.