This article, which examines the role of the State in the redistribution of economic resources during the first decade of the 21st century, was written as part of IDI’s Arab-Jewish Relations project. It is one of a series of articles on inequality of opportunity and resource distribution between the Jewish and Arab sectors in the State of Israel.
This article examines, in a descriptive but precise manner, the role of the State in the redistribution of economic resources during the first decade of the 21st century. The importance of such an inquiry is derived from two interwoven branches of research. The first is a broad, in-depth, and unified paradigm that sees economic inequality as a powerful variable that has detrimental consequences for society and the individuals within it; the second is the understanding that influencing economic inequality and its scope is an extremely important role that constitutes one of the pillars of the modern welfare state. Consequently, this study examines the State's ability to intervene in the economic inequality between households under its aegis and tries to enhance the understanding of this intervention as a dynamic and evolving process.
However, beyond an examination of all sectors, special importance is attached to the division of Israel's population into two main interest groups—Jews and Arabs. This division makes it possible to cut loose, to some extent, from the assumption of a monolithic Israeli population and to investigate the differential effect of the State's intervention on each of the two sectors, which constitute the 'reference group' for their individual members. Therefore, we studied the State's influence on reducing the gaps between the two sectors and on reducing the disparities within each sector, with regard to the development of this intervention during the past decade.
In order to achieve our research aims, we analyzed the household income data from the samples that were included in the income surveys conducted by the Central Bureau of Statistics in three years: 2000, 2005, and 2010. Each household's income was calculated before the State's intervention (economic income) and after the State's intervention (disposable income), which resulted in a picture of income distributions in the two situations for those three years. Although the institutions and policy related to the nation state influence the degree of inequality between households in many ways, both direct and indirect, this article focuses on the most important direct mechanisms available to the state: direct taxation and public transfer payments.
The analytical method relied almost entirely on the following descriptive statistical measures: the Gini index, Lorenz curves, and examination and comparison of means for various cross-sections of the population.
In general, the results show a progressive influence of the State's intervention on inequality in the population as a whole and within the various sectors for all the years examined. That said, a look at the measures over time makes it clear that in all sections of the population, there has been a significant decline in the improvement found in inequality as a result of the State's intervention, at least since the year 2000. It is also clear that the changes are not uniform across the two sectors or across the income deciles. It emerged that State intervention has greater influence on promoting economic equality within the Arab sector than within the Jewish sector, and has greater progressive impact on the gaps between the two sectors within the upper deciles than in the lower ones, compared to the raw gap between the sectors.
Amit Lazarus is conducting research as part of IDI's Arab-Jewish Relations project.
The author is indebted to Prof. Michael Shalev and Prof. Guy Stecklov of the Department of Sociology and Anthropology at the Hebrew University of Jerusalem for their introduction to this research topic and its theoretical and empirical underpinnings. Their support and encouragement throughout the research is also greatly appreciated.