Yaron Zelekha

The effect of corruption on entrepreneurship in developed vs non-developed countries

Purpose – The purpose of this paper is to focus on the relationship between corruption and productive entrepreneurship in general and whether it depends on countries’ specific characteristics in particular. Design/methodology/approach – The authors used a unique data set of entrepreneurial activity within 176 countries, collected from the professional networking site LinkedIn. The authors used OLS regression to estimate the level of entrepreneurship. The main independent variable was the CPI score (Transparency International). In addition, two sub-samples were used, 70 less-developed countries and 34 OECD countries, and numerous control variables. Findings – The paper makes three important contributions to the field. First, it proposes worldwide empirical evidence that countries with high levels of corruption usually face low levels of productive entrepreneurship. Second, the paper suggests that the negative effect is much more significant in developed countries than in developing countries. Third, the pa...

The Effect of Immigration on Entrepreneurship

This research focuses on the impact of immigration on entrepreneurship. I find clear evidence that immigration has a significant impact on entrepreneurship. The paper makes three important contributions to the research of both immigration and entrepreneurship. First, it proposes unique empirical evidence using a cross‐section analysis in which the countrys level of immigrants has a significantly positive affect on its level of entrepreneurship. Second, it adds to the theoretical understanding of the mechanisms and environments that characterize positive immigration effects on entrepreneurship. I suggest that country‐specific characteristics – in particular urban, open, competitive and culturally diversified (including open minded for ethnic and gender diversity) – influence significantly the positive effect of immigrants on the countrys level of entrepreneurship. Furthermore, these positive effects are magnified as the flow of immigrants grows. Third, it uses for the first time in the literature a cross‐section data set of 176 countries of immigrants and entrepreneurial activity.

Fixers as Shadow “Public Servants”: A Case Study of Israel

Fixers can thrive in any level of political, bureaucratic, or institutional development. Paradoxically the academic research of the phenomenon of fixers is in its infancy. There exists no accepted definition of fixers; the boundaries between fixers and lobbyists remain murky, in terms of comparative administration only limited knowledge about the forces that breed different types of fixers in different political settings is available; and no deductive theory was articulated that might determine when and how fixing might become dysfunctional and corruptive. In an attempt to better understand the phenomenon of fixers more theoretically; this study analyzes fixers in view of three theories of bureaucratic corruption, and in view of the emerging theory of alternative politics. Using Israel as a case in point, the study shows that within certain national and local branches of government fixers not only create a shadow copy of official institutions, but also foster institutional corruption.

Ex-officio Adviser: Kahn in Israel, 1957 and 1962

This chapter documents Richard Kahn’s role as an unofficial advisor to the Israeli government, using archival and published sources. In 1957, Kahn predicted that the EEC customs union would harm Israel’s trade and that the EEC would reject Israel’s application for Associate Membership. He proposed a major reform of the COLA that would significantly reduce real wage protection and move Israel closer to the Swedish wage system. In 1962, he took a neutral position regarding the sustainability of Israel’s international imbalances. He also criticized Israeli policymakers for overestimating the potential benefits of an Israel-EEC commercial agreement and argued that the EEC would make reducing Israel’s trade deficit more difficult, even if the UK did not join. Ultimately, Israeli policymakers ignored Kahn’s advice: they continued to push for EEC Associate Membership and failed to adopt his proposal for COLA reform. In that sense, Kahn was unsuccessful as an advisor, but he was probably successful in the more limited sense of helping government officials attain greater clarity on economic issues.

Adviser and Activist: Lerner on the Israeli Economy, 1953 and Afterward

Over the period 1953–1956, Lerner served as a resident economic advisor to the State of Israel. For most of this period, Lerner was a member of the Economic Advisory Service (EAS). He also served in 1956 as an advisor to the Finance Ministry. This chapter utilizes the Lerner Papers and the EAS papers in Israel State Archives to document Lerner’s activities and influence in these roles. Lerner analyzed export subsidies, the proposed legislation to establish the Bank of Israel, and the cost of living allowance (CLA system). He also played the unconventional role of critical public intellectual. He contributed to “the economic independence debate” and even launched a campaign to abolish the CLA. He continued his attacks on it after returning to the USA, albeit changing his views in 1974, after the oil price shock and its impact on the Israeli system of wage linkage. We conclude by conjecturing that Lerner’s views emanated from his observations of the operations of the National War Labor Board (1942–1947) and the problem of Federal Reserve independence (1942–1951).

Stabilization via Government Accounting Reform: The 2003 Program and Politicization of Recovery

In this chapter, we deal with the unique characteristics of fiscal policy in Israel, between the stabilization program of 1985 and up to 2007. This policy kept one of the largest and inefficient public sectors and directly led to another “lost decade” between 1995 and 2003 and to the return of the “great recession” in the Israeli economy. The crisis called for a new stabilization plan, which stressed drastic contraction of public spending and of tax burden, parallel to a significant reform in conduct, ethics, and norms of the government. The severity of the crisis allowed massive implementation of the reforms with significant results. However, a few years after its successful implementation and the high growth which was achieved, the central tenets of the plan were abandoned, and the Israeli economy deteriorated again.

Economic Analysis, Advice, and Stabilization, 1972–1992: The Stein-Fischer Nexus

In this chapter we provide an overview of the politico-historic setting and concern with foreign exchange reserves and government finance in Israel that set the tone for the inflationary spiral over the period 1980–1985. We deal with the long run economic background leading up to the crisis of 1984–1985 and 1985 stabilization plan that is starting in 1970 with a return to a “double-digit” inflation that characterized the years 1948–1954, accelerated by OPEC 1 and 2, and hyperinflation. We then focus on the crisis of 1984–1985 and the 1985 stabilization program itself and on the outcome of the stabilization program designed, in the main, by Stein and Fischer, its ostensible success, and the input of Stein and Fischer regarding 1992 US loan guarantees. Throughout the chapter, the emphasis will be on the views of Stein and Fischer and assessments, contemporary and retrospective, of the 1985 stabilization program and its outcome.

Economic Crisis and Policy Prescriptions: The Kalecki and Mikesell Reports, 1950–1952

In early 1950, the left-leaning Israeli government came under attack from opposition parties that denounced its quasi-socialist economic policies. They advocated the abolition of exchange and price controls, along with the introduction of a floating exchange rate. In response, the government turned to the well-known economist, Kalecki, who, in a September 1950 report, recommended not only the retention of exchange controls but of price controls. His advice was at first implemented, although it seems that he was initially approached to strengthen the image of policy decisions that had already been made. Later on, in a politically inspired economic reform, the government distanced itself from his recommendations. By April 1952, Israel’s financial position had deteriorated, due to a short-term foreign currency debt crisis. The US government decided to send an economic expert, Mikesell, to Israel. His main recommendation was the immediate implementation of a detailed and comprehensive foreign exchange budget, albeit over the initial objections of the then Israeli finance minister. This was eventually put into place, enabling continued US support of Israel’s “New Economic Policy,” which distanced the economy from the earlier quasi-socialist policies advocated by Kalecki and the Israeli government itself.

Politicization of Policy Prescriptions: Friedman and Israeli Economic Reform, 1977

In May 1977, a political sea change took place in Israel, when the Likud Bloc replaced the Labor Party that had ruled since 1948. The government invited Friedman to serve as an unofficial economic policy adviser. Friedman visited Israel in July 1977 and proposed a broad package of free market-oriented reforms. This chapter documents Friedman’s views, activities, and influence using a wide range of primary sources. He advocated gradual disinflation, floating the currency, phasing out exchange controls, reducing government expenditures and taxes, privatizing state lands, and abolishing subsidies and directed credit. However, before his visit, Friedman was reported as calling for “a free labor market and a certain amount of unemployment.” This led to opposition attacks; consequently, the government distanced themselves from his views. In October 1977, the government announced an “economic revolution.” It liberalized exchange controls, reduced subsidies and tariffs, and essentially floated the currency. Friedman was not informed of this in advance. Still, he lauded the government for its “courage and wisdom” and predicted a “reduction of inflationary pressures.” But the government again distanced itself from his views. The “revolution” did not succeed; inflation accelerated. Still, parts of his agenda were ultimately implemented by later Israeli governments.

Introduction: The Impact of Economic Advisers in Israel

I realize how unusual it is for outside advisers to be given as active a role in the formulation of policy as we eventually had. (Fischer 1995, 3)