An Analysis of the Economic System in Israel

What is the economic system of Israel? The economy of Israel is based on a mixed economy. The country’s economic system combines elements of a market economy and a planned economy.

In Israel, the economy is composed of a private sector, consisting of individuals and businesses that make autonomous decisions based on self-interest, and a public sector, where the state determines the production and distribution of certain goods and services. No country is purely capitalist or purely communist.

What do the freedom indexes tell about the economic system of Israel?

To determine if a country is mostly a market economy or a planned economy, it is useful to examine some economic indexes. For instance, according to the 2022 Index of Economic Freedom, which measures the ability of every human to control his labor and property, Israel is ranked 43rd globally and 2nd in the Middle East and North Africa indicating that the country has a moderately free economy.

Similarly, the 2022 Freedom House index evaluates the state of political rights and civil liberties globally. Generally, market economies tend to align more with democracy and freedom, while command economies tend to be characterized by greater state control and fewer democratic and civil liberty protections. Israel gets a score of 76/100, which qualifies it as Free.

Israel is a country where the government does not control what people do for political reasons, and people have the freedom to choose (what, how much, and how to produce, whether to buy or not, selling price, etc.)

The Link Between Public Sector Employment and the Economic System of Israel

An indicator of the extent to which the State is involved in the economy is the number of public sector employees. In Israel, according to ILOSTAT, the number of public sector employees as a percentage of the total workforce is 31.4% (2021).

In the country’s mixed economy, the number of public sector employees as a percentage of the entire workforce varies based on the specific policies and practices adopted by the State. Some economic activities are left to the private sector while others are under government control. The bigger the public sector the closer the economy is to be a command economy.

What does the biggest company in Israel say about the country’s economic system

The biggest company in Israel should also be looked at, as well as whether it is a state-owned or private company. In this case, Check Point Software Technologies Ltd. is a multinational cybersecurity company. As a publicly traded company, its ownership is distributed among multiple shareholders, including institutional investors, individual investors, and other entities.

More: Top 10 Biggest companies by revenue in Israel

The historical factors that have influenced the economic system of Israel

The current mixed economy system of Israel in the last century is the result of a combination of factors, including the influx of immigrants, the development of a strong industrial sector, the growth of the service sector, and the liberalization of the economy. These factors have allowed Israel to become a major player in the global economy, with a strong focus on innovation and technology.


An Analysis of the Economic System in Israel


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