Monday, February 20, 2017

The True Stats of Doing Business

Alon Kupererd
Jerusalem Institute for Policy Research,

If one examines the available data on openings and closings of businesses, while ignoring the net change in the number of businesses, one might conclude that the business sector is constantly in flux – given the large numbers of openings and closings.

Indeed, the data on business registrations, as provided by the Central Bureau of Statistics and presented in the 2017 Statistical Yearbook on Jerusalem (forthcoming), indicate that in all economic sectors, with the sole exception of the manufacturing, mining, and quarrying sector, there has been a gradual increase in the number of active businesses during 2015. For example, during this year Jerusalem saw the opening of 242 new businesses in the real estate sector while 137 were shut down, indicating a positive net change of 105 businesses for this sector. This is smaller than the figure for Tel Aviv-Yafo, which saw an increase of 212 businesses in the real estate sector during the same year. In Haifa there were 146 business openings and 88 closings, yielding a net change of 58 new businesses – well below the figures for Jerusalem or Tel Aviv.

The important question, however, is whether this net change is a true reflection of activity trends in the business sector. Not necessarily, as it turns out, given that the absolute numbers do not accurately represent the proportionate change in the number of businesses in a city, and given that the economy of a city varies with the size of the city. As such, any comparison across cities requires an index of measurement that neutralizes variance in the number of active businesses per city. So let us compare business activity across cities using ratios per 1,000 businesses.

When we examine the above data using this method, we find that Jerusalem saw an increase of 44 businesses for every 1,000 active businesses, while Tel Aviv had an increase of 33 businesses per 1,000. In Haifa the proportion was 40 businesses per 1,000. Thus we see that even though Tel Aviv saw the greatest increase in this sector in absolute numbers, its rate of growth was the lowest among the three major cities, including Haifa, which had the lowest figure in absolute numbers.

In addition to the rate of growth, we can also examine stability. To see which sectors maintained relative stability and which underwent high turnover, let us calculate the rate of change among businesses (sum of business openings and closings) per 1,000 active businesses.

When we compare across sectors, we find that among the three major cities and Israel as a whole, the sector with the highest rate of business openings and closings was that of accommodation services and restaurants (287 openings and closings per 1,000 active businesses in Jerusalem, 260 in Tel Aviv, and 315 in Haifa).

The sectors with the next highest rates of openings and closings were the hi-tech industry (257 in Tel Aviv, 229 in Israel, 220 in Jerusalem, and 212 in Haifa) and information and communications (232 in Tel Aviv, 228 in Israel, 226 in Jerusalem, and 225 in Haifa).

It should be noted that those sectors that showed high rates of business openings and closings also had relatively high rates of growth in terms of the number of businesses per 1,000 active businesses: in Jerusalem the hi-tech industry ranked second and the information and communications sector ranked fourth; in Tel Aviv the hi-tech industry ranked first and the information and communications sector ranked second.

Translation: Merav Datan

Monday, February 6, 2017

What Would You Like to Buy?

Lior Regev
Jerusalem Institute for Policy Research

One of the indices of a country’s economic status is the rate of ownership of durable goods. Durable goods are purchased once every few years and include, for example, furniture, cars, or electric appliances such as a refrigerator, stove, or washing machine. In the modern capitalist economy, which relies on the market system and private property, ownership of durable goods serves as an indicator of a household’s economic welfare and standard of living.

The Central Bureau of Statistics (CBS) conducts an annual survey that examines ownership of various goods and services, among other factors (Survey of Household Expenditures). The list of goods whose ownership the CBS examines is updated annually, in accordance with economic development and technological preferences. A review of previous surveys finds that in the past it examined ownership of video players, which was later updated to DVD players. Perhaps future surveys will examine ownership of wrist-band microchips that project movies onto walls….

For some goods, increasing ownership rates corresponded with a rising standard of living, but the increase over the years was gradual. For example, the percentage of Israeli households that owned at least one vehicle was 55% in 1999, 58% in 2005, 62% in 2009, and 65% in 2014.

A comparison across cities finds that differences in vehicle ownership rates are relatively small. In 2005, 50% of Jerusalem households owned a vehicle – very comparable to rate for Tel Aviv (50%) and slightly lower than the rate for Haifa (53%). A decade later, in 2014, 60% of Tel Aviv households owned a vehicle – comparable to the rate for Haifa (61%) and higher than the rate for Jerusalem, at only 56%. The relative consistency of vehicle ownership rates reflects the high cost of owning this means of transportation and the economic stratification of households in Israel.

For other goods, ownership rates saw a dramatic increase over the years, as well as differences across various cities. The most salient example is air conditioners, which were seen historically as less necessary in Jerusalem given its comfortable climate relative to cities in central Israel. In 1999, for example, only 12% of Jerusalem households reported owning an air conditioner, compared with 42% in Tel Aviv and 39% in Haifa.

The rising standard of living alongside global warming has transformed air conditioners from a luxury item into a good that is essential for surviving the interminable Israeli summer. In 2014, a decisive majority (94%) of Tel Aviv households reported that they own an air conditioner. In Haifa the rate was 84%, comparable to the figure for Israel (82%). Jerusalem, too, has shown a significant increase in recent years, from 41% in 2009 to 60% in 2014, but it still has a long way to go to catch up with the coastal cities.

Translation: Merav Datan