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Israel
Changes in Industrial Structure
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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