Skip to content

Tools and calculators

Press Releases

Back

New research in the Bank of Israel The tendency of the gaps between regional rates of unemployment in Israel to contract, except for in the Southern District

29/05/2007

New research in the Bank of Israel The tendency of the gaps between regional rates of unemployment in Israel to contract, except for in the Southern District The views expressed in this paper do not necessarily reflect those of the Bank of Israel
29.5.2007

	Similar to findings in many countries around the world, significant regional differences in rates of unemployment (especially between the central conurbation and the outlying regions) have been recorded in Israel. These differences have persisted and even widened.
	Despite the widening of the gaps between the regional unemployment rates, the research found that there is a tendency for the rates in all districts, except for the Southern District, to converge (i.e., for the gaps to narrow). The convergence occurs more notably and rapidly in adjacent regions.
	The convergence of the unemployment rates shows that a policy that encourages growth at the national level should benefit most districts. The south requires special attention to deal with the problem of unemployment.
Regional differences in unemployment rates, particularly between the center of the country and the outlying districts, were noted in Israel as early as in the 1970s, in a period when the economy was enjoying full employment. Since then the gaps have widened, as the overall unemployment rate rose (see figure).

Source: Central Bureau of Statistics and authors’ calculations

An examination of the unemployment rates in the six districts––the Jerusalem, Northern, Haifa, Central, Tel Aviv and Southern Districts––shows that in three of them unemployment kept pace with the rate in the economy, in the Tel Aviv and Central Districts unemployment was consistently lower than in the other districts, and in the Southern District, it was higher than in the others.
The research by Natalia Presman of the Bank of Israel Research Department and Vadim Klepfish of the Ben Gurion University of the Negev Department of Economics examined whether in spite of the widening inter-regional gaps between the unemployment rates observed hitherto, a process of long-term convergence (narrowing of the gaps) is possible. Indeed, empirical tests do show convergence of the unemployment rates in five of the districts, with only the Southern District showing unemployment developing differently from the other districts.
The research also examines the convergence of the regional rates of unemployment among those with a high level of education (13 or more years of schooling) and those with 0–12 years of schooling. It was found that among the higher educated there was a tendency to converge to a uniform unemployment rate in the Jerusalem, Haifa, Central and Tel Aviv Districts, while among the lower educated there was tendency for fixed gaps to persist between the districts.
When changes in unemployment between pairs of districts were analyzed, a tendency to converge was found in most pairs, and it was also found that the convergence was most marked and rapid in cases of adjacent districts, i.e., between the Tel Aviv and the Central Districts, and between the Northern and Haifa Districts.
The convergence of unemployment rates in different districts shows that a policy that encourages growth at the national level should benefit most districts, with their unemployment rates converging. This does not apply to the Southern District, where unemployment develops differently from the other districts. This exception requires that special attention be paid to solving the problem of unemployment in that district.