Government intervention in industry: The case of Israel |
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| Institution: | 1. Universidade Federal Fluminense, Brazil;2. Universidad de los Andes, Colombia;1. Nuffield College, Oxford University, United Kingdom;2. CAGE, United Kingdom;3. Adam Smith Business School, University of Glasgow, United Kingdom;4. Department of Economics, University of Warwick, United Kingdom;5. IZA, Germany;6. CESifo, Germany;1. Department of Economics, National University of Singapore, Singapore;2. Ben Gurion University, Israel;3. CEPR, UK;4. CESifo Germany;5. IZA Germany |
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| Abstract: | Industrial activity in Israel is marked by considerable government intervention, especially in the capital market. This paper examines its effect on rates of return, risk, exports, and the structure of industry (concentration and firm size). The results (1965–1980) show that risk (whose main element is the probability of bankruptcy), R&D spending and human capital were positively related to the rate of return; the effect of firm size and concentration was negative, an unexpected result reflecting mainly government support generating excess investment and unutilized capital. Although most industries in Israel are private and competitive government measures had a substantial, mostly indirect, negative effect on the determinants of industrial performance. |
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