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2

Gini coefficients of disposable income inequality

(Mid 1980s and late 2000s)

2008

1985

Source: Divided we stand: why inequality keeps rising, OECD (2011).

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3

Inequality in Israel

Gini Index (1997-2011)

Source: Bank of Israel.

0.34

0.36

0.38

0.40

0.42

0.44

0.46

0.48

0.50

0.52

0.54

Market income Disposable income

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Change from1997-2011

201120041997

0.0150.0340.0290.019Between

Marketincome -0.0360.260.2830.296Within

-0.0200.2950.3120.315Total

0.0140.030.0260.016Between

Disposableincome -0.0020.2040.2080.206Within

0.0120.2340.2340.222Total

Income inequality between and within population groups

(Theil coefficient)

Source: Bank of Israel.4

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Unemployment rate (15+) and real wage per employee post

(Quarterly, 2000-2013)%

Source: Based on Central Bureau of Statistics.

NIS

7,000

7,500

8,000

8,500

9,000

9,500

-6

-4

-20

2

4

6

8

10

12

14

16

GDP Growth Rate (left scale)

Unemployment Rate (left scale)

Real Wage per Employee (right scale)

5

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6

Source: Bank of Israel.

35%

36%

38%

39%

40%

41%

43%

44%

45%

Percentage households with two or more wage earners

(2000-2011)

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Summary Inequality in disposable income distribution rose until 2006 before

stabilizing at a very high level.

Inequality in distribution of market income is high, but has been falling

since 2002.

Most inequality comes from within groups.

Most of the increase in inequality comes from the increase in inequality

between groups.

The labor market in Israel is very flexible (high & rising participation

rates, low unemployment, wages are responsive to the business cycle).

There is a clear trade-off between labor market flexibility and

disposable-income inequality.

The reductions in transfers and in direct taxes over the years

contributed to both.

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Are we at the right balance between labor market

flexibility and the level of inequality?

Are there policies that can contribute to reducinginequality while maintaining labor market flexibility?

Questions:

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9

Thank you

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Source: Bank of Israel

80.0%

80.5%

81.0%

81.5%

82.0%

82.5%

83.0%

83.5%

84.0%

Proportion of income from work out of total household income

(2000-2011)

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11/1111Source: Bank of Israel

18,000

18,500

19,000

19,500

20,000

20,500

21,000

21,500

22,000

Real income from work in households with two or more wage earners

(2000-2011)NIS