Prof. Joseph Zeira joined the Institute for Israel and Jewish Studies on Tuesday, October 20, to discuss the long-term economic impact of conflict, conscription, and defense spending in Israel.
This talk described the costs of the Israeli-Arab conflict to Israel. These are direct costs, which are mainly military spending, and indirect costs, which are mainly forgone output. During the period of the wide conflict with the Arab countries, between 1948 and 1980, the direct costs of the conflict were very high, as it involved conventional wars. After the Peace with Egypt the conflict became narrow, between Israel and the Palestinians mainly. This involved fighting with militias, which has low direct costs. However, the indirect costs remained high and even increased. First, every eruption of the conflict with the Palestinians causes a recession. Second, conscription delays entry of young people to their work career and that is costly as it reduces their human capital for many years. The largest indirect cost is a result of the high risk of the conflict, which deters investment. As a result, the conflict reduces the relative size of physical capital in Israel. Hence, the reduction of this risk could increase output by more than 26 percent.
In contrast to these high costs, the economic benefits of the conflict are rather low.
Joseph Zeira is professor emeritus of Economics in the Hebrew University of Jerusalem. During the years, he visited Harvard, Brown, Brandeis, the University of Crete, Columbia University and Northwestern University. Joseph Zeira is a macroeconomist, who specializes in a number of areas: technology and economic growth, income distribution, money and liquidity, and the economy of Israel. His book, The Israeli Economy: A Story of Success and Costs, was published in 2021 by Princeton University Press.
Joseph Zeira has also been involved in a number of professional activities, as an advisor to the Minister of Finance in Israel, as a board member of a Pension Fund, and in the Aix Group, where Israelis, Palestinians, and Internationals study the economic aspects of a potential peace agreement between Israel and Palestine. In 2014, he was a member of a government committee for reducing poverty in Israel. In 2016-2020, he served as the president of the Israeli Economic Association. Since 2020 he is the Chair of the Magid Institute for External Education in the Hebrew University.
The lecture is available to view in full below.
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