Monday, July 29, 2013

Innovative doesn't count for much if you can't afford to innovate

JDC’s Taub Center for macroeconomic research in Israel has an impressive report out on the “State of the Nation” in 2013. There’s a compelling case there that Israel’s current macro picture is only positive in relative terms. The long-term trajectories are troubling. The more we know about them, the more we can act.

These two graphs, I think, really put the entire picture in context. On the one hand, Israel is one of the most innovative countries in the world (based on the number of patents relative to population) but we have incredibly low labor productivity (amount of GDP per hour worked). In 2011, Israel’s labor productivity was lower than 23 of the OECD countries. And when you have low labor productivity, you're going to have lower hourly wages, lower efficiencies and lower employment.

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