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WEEKLY NEWSLETTER
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Israel
Index
The industrial structure of the economy can be seen in terms of
the allocation of GDP, employment, and foreign capital among the
tradable, nontradable, semitradable, and service sectors. The
tradable sector includes agriculture, manufacturing, and
transportation; nontradables include public services and
construction; and semitradables include business and financial
services, commerce, tourism, and personal services. Public services
include the activities of government, national institutions, and
local authorities; education, research, and scientific
organizations; health, religious, political, and trade-union
groups; and defense.
Up to 1981, the economy allocated approximately 40 percent of
its GDP to the tradable sector and about 33 to 35 percent to the
nontradable sector. This distribution was mirrored in the
allocation of civilian employment across the two sectors. The size
of the public service sector in 1981 was 21 percent of GDP and 28
percent of civilian employment. Some economists argue that this
latter figure is very high relative to the international norms for
a developing country. They are not high, however, when compared to
developed socialist countries in Europe. Some economists also argue
that Israel's high level of nontradables can be explained by the
high level of capital inflows from abroad, by a high demand for
public services and construction as a result of immigration, and by
defense needs.
From 1955 through 1972, the real output of tradables increased
relative to that of nontradables. Most of this increase was
attributable to the importance of physical capital in the form of
machinery and increased productivity. After 1972 the importance of
machinery declined, while that of labor increased. Educated workers
were being absorbed into the public and financial services;
simultaneously, manufacturing productivity was declining. Increased
demand favored nontradables, and the share of tradables in both
employment and output further declined. The overriding factor
remained the rapid increase in the educated labor force.
Data as of December 1988
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