Toward Balanced Growth

Two of the most serious problems in Israel are unbalanced growth and large income gaps. Are they connected? How can the information technology business sector be enlisted to solve these problems? These two questions form the basis of this work. Composed in advance of the 14th Caesarea Conference in 2006, it proposes several measures, including (1) active policy measures to deal with the failures that prevent equality and broad long-term economic growth and (2) using the economic strength of the technology sectors to advance other, slower-growing sectors.

The first measure means using macroeconomic tools to increase the productivity of traditional industries and especially implementing a policy of integration in the labor market. The document details a number of ways to absorb the Ultra-Orthodox, minorities, residents of the periphery, and single mothers into the labor force, and emphasizes using technology for “outsourcing” within the economy. The second measure would encourage the growth of traditional industries by investment in research and development. The third measure is to encourage projects that make a large contribution to the Israeli economy by employing information technologies to streamline processes and by exploiting the relative advantages of Israeli industry. The fourth and final measure is a change in the institutional structure for research and development. The authors recommend establishing a socioeconomic authority in the Prime Minister’s Office, which would focus on increasing growth and reducing disparities in Israel.