Economic Concentration in the Start-Up Nation: Is Privatisation to Blame?

In this paper we examine the underlying sources of economic concentration in Israel, which is unusually high for a developed and innovative economy. After a brief review of Israel's economic history since the start of the British Mandate, we describe the level of economic concentration, privatisation policy and other public policies that potentially contributed to the creation and persistence of the concentration problem. We argue that privatisation is not likely to be a causal factor, mainly because concentration was present and substantial at least two decades before modern privatisation policies were adopted. It is more plausible to argue that other economic policies, such as R&D subsidies, tax breaks for capital investment, export subsidies, tariffs, stringent regulations and barriers to competition played a major role in the emergence and persistence of economic concentration.