Israel’s Immigration Story: Winners and Losers

Abstract

The exodus of Soviet Jews to Israel in the 1990s was a unique event. The immigration wave was distinctive for its large high skilled cohort, its quick integration into the domestic labor market, and its unprecedented election participation rate. The wave of immigration changed the entire economic landscape: It raised productivity, underpinned by the information technology surge, and had a significant impact on income inequality. The extraordinary experience of Israel, which absorbed three-quarters of a million immigrants from the Former Soviet Union within a short time, is also relevant for the current debate about winners and losers from immigration. This paper provides evidence and a rigorous political-economy explanation for a potential link between the immigration wave and the markedly changed level of redistribution in Israel’s welfare state.