The Origins of Income Inequality in Israel - Trends and Policy

45 Pages Posted: 18 May 2015

See all articles by Ofer Cornfeld

Ofer Cornfeld

Tel Aviv University - Eitan Berglas School of Economics

Oren Danieli

Harvard University - Department of Economics

Date Written: May 2015

Abstract

This paper analyzes the trends in the level and the composition of income inequality in Israel between the years 1987 and 2011. The main trends found in income inequality among individuals are: a decline in the wage share of the middle wages, an increase in the prevalence of part-time jobs at the lower end of the labor market, and an increase in the concentration of income at the high end of the labor market. We analyze the relative contribution of income inequality between genders, between Jews and Arabs, and by years of education to the total level of inequality. We show that individuals with secondary education or less did not benefit from the contemporary growth in GDP. In addition, we analyze the trends in levels of inequality of equivalized household income from 1997 onward. We prove that the level of inequality before redistribution has declined due to an increase in labor force participation. However, the level of inequality after taxes and transfers has increased. We show that this increase is the result of a significant reduction in direct taxes and transfers.

Suggested Citation

Cornfeld, Ofer and Danieli, Oren, The Origins of Income Inequality in Israel - Trends and Policy (May 2015). Israel Economic Review, Vol. 12, No. 2 (2015), 51–95. Available at SSRN: https://ssrn.com/abstract=2607192

Ofer Cornfeld (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

Oren Danieli

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

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