Ignoring Israel's Potential Engines of Growth

Israel's engines of growth will come not only from productivity growth and R&D, but also from high employment industries that other rich countries are able to profitably maintain.

The panel on Israel's engines of growth at the 2008 Herzliya Conference chose bio-tech and Christian tourism as possible engines of future growth.

As Ricardo Hausmann showed during his recent sessions with Israel's key decision makers, countries support their growth in one of three ways. Countries can invent new products. Encouraging bio-tech is an example of this method. Countries can also improve the productivity of existing industries. Encouraging Christian tourism is an example of this method.

The most effective means of developing engines of growth and jobs was not discussed though. Leapfrogs in Western Europe and the Asian Tigers were based on the gradual evolution of the countries' manufacturing base to an ever greater number of similar products. Japan started with radios, but quickly moved to TVs.

Israel does well in boutique agriculture, chemicals, and high-tech and has extended its comparative advantage in each of these fields. On the other hand, it hasn't expanded into other sorts of manufacturing or services that rich countries with similar economies also produce.

In addition to talking about tourism and bio-tech, Israel should be asking: "What are rich countries that export the things we export producing profitably that we are not? and why?"

For Further Reading:

The Product Space Conditions the Development of Nations

The 2008 Herzliya Conference - Engines for Growth: Energizing the Israeli Economy

  • Chair: Adv. Dror Strum, Director, Israeli Center for Economic Planning
  • Mr. Yossi Hollander, Chairman, Israeli Center for Economic Planning
  • Prof. Zvi Eckstein, Deputy Governor, Bank of Israel; Eitan Berglas School of Economics, Tel-Aviv University
  • Dr. Yacov Sheinin, CEO, Economic Models
  • Mr. Shaul Tsemach, Director General, Ministry of Tourism
  • Discussant: Mr. Eli Gonen, President, Israel Hotel Association