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Lessons from the Kibbutz on the Equality-Incentives Trade-Off

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  • Ran Abramitzky
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    Abstract

    The first kibbutz was established southwest of the Sea of Galilee in 1910, but the vast majority of kibbutzim were established in the 1930s and 1940s, shortly before the creation of the state of Israel in 1948. Founders aimed to create a "new human being" who cared about the group more than about himself, a homo sociologicus who would challenge the selfish homo economicus. This idealistic view can explain many of the key features of kibbutzim: equal sharing in the distribution of income; no private property; a noncash economy; communal dining halls where members ate their meals together; high provision of local public goods for use by kibbutz members; separate communal residences for children outside their parents homes, which were supposed to free women from their traditional role in society and allow them to be treated equally with men; collective education to instill socialist and Zionist values; communal production, whereby kibbutz members worked inside their kibbutzim in agriculture or in one of the kibbutz plants; and no use of hired labor from outside kibbutzim—because hiring labor was considered "exploitation" under the reigning socialist ideology. To an economist, steeped in thinking about incentives that self-interested individuals face, there are three reasons why an equal-sharing arrangement of this sort seems unlikely to last. First, high-ability members have an incentive to exit equal-sharing arrangements to earn a wage premium—so-called "brain drain." Second, low-ability individuals have an incentive to enter equal-sharing arrangements so that they can be subsidized by more-able individuals—so-called adverse selection. Third, in context of equal sharing, shirking and free-riding are likely to be prevalent. However, kibbutzim have survived successfully for the past century and currently consist of 120,000 members living in 268 kibbutzim. In a number of ways, the kibbutzim offer an exceptional environment to examine the potential trade-off between equality and incentives.

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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 25 (2011)
    Issue (Month): 1 (Winter)
    Pages: 185-208

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    Handle: RePEc:aea:jecper:v:25:y:2011:i:1:p:185-208

    Note: DOI: 10.1257/jep.25.1.185
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    1. Edward P. Lazear, 2000. "The Power of Incentives," American Economic Review, American Economic Association, vol. 90(2), pages 410-414, May.
    2. Ran Abramitzky, 2008. "The Limits of Equality: Insights from the Israeli Kibbutz," Discussion Papers 07-048, Stanford Institute for Economic Policy Research.
    3. Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
    4. Feldstein, Martin & Wrobel, Marian Vaillant, 1998. "Can state taxes redistribute income?," Journal of Public Economics, Elsevier, vol. 68(3), pages 369-396, June.
    5. Ran Abramitzky & Isabelle Sin, 2010. "Book Translations As Idea Flows: The Effects of the Collapse of Communism on the Diffusion of Knowledge," Discussion Papers 09-032, Stanford Institute for Economic Policy Research.
    6. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    7. Jonathan Levin & Steven Tadelis, 2005. "Profit Sharing and the Role of Professional Partnerships," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 131-171, January.
    8. Knez, Marc & Simester, Duncan, 2001. "Firm-Wide Incentives and Mutual Monitoring at Continental Airlines," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 743-72, October.
    9. Ran Abramitzky, 2008. "The Limits of Equality: Insights from the Israeli Kibbutz," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 1111-1159, August.
    10. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
    12. Danziger, Leif & Neuman, Shoshana, 1993. "Equality and Fertility in the Kibbutz," Journal of Population Economics, Springer, vol. 6(1), pages 57-66.
    13. Guinnane, Timothy W., 2001. "Cooperatives As Information Machines: German Rural Credit Cooperatives, 1883 1914," The Journal of Economic History, Cambridge University Press, vol. 61(02), pages 366-389, June.
    14. Abramitzky, Ran, 2009. "The effect of redistribution on migration: Evidence from the Israeli kibbutz," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 498-511, April.
    15. Kaivan Munshi & Mark Rosenzweig, 2009. "Why is Mobility in India so Low? Social Insurance, Inequality, and Growth," NBER Working Papers 14850, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Guillermo Alves & Gabriel Burdin & Paula Carrasco & Andrés Dean & Andrés Rius, 2012. "Empleo, remuneraciones e inversión en cooperativas de trabajadores y empresas convencionales: nueva evidencia para Uruguay," Documentos de Trabajo basados en Monografías (students working papers) 12-14, Instituto de Economía - IECON.
    2. Ebenstein, Avraham & Hazan, Moshe & Simhon, Avi, 2014. "Changing the Cost of Children and Fertility: Evidence from the Israeli Kibbutz," Discussion Papers 164526, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.

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