What's Your Number? A Tale of Three Economies - with Ariel Karlinsky
Jan 14, 2026
Ariel Karlinsky, a PhD student at Hebrew University and researcher on Israeli public finance, reveals the surprising dynamics of Israel's three economiesâone prosperous, two resembling the developing world. He discusses how welfare policies have created significant fiscal imbalances and what this means for the future. Ariel analyzes the employment challenges among the Haredi population and highlights necessary reforms in taxation and education. The conversation dives into whether Israel can change incentivization to ensure a sustainable economic future.
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Episode notes
Israel Is Three Economies, Not One
- Israel contains three distinct economies with massive productivity gaps between groups.
- The non-Haredi Jewish sector is very wealthy while Arab and Haredi sectors have GDP per capita near developing countries.
Progressive Income Tax Drives Hidden Redistribution
- Israel's tax system is highly progressive so lower-income households often pay almost no income tax.
- That amplifies redistribution via public services (health, education) and creates large net transfers to low-income groups.
Policy Choices Shaped Long-Term Incentives
- Political decisions and court rulings expanded child allowances and benefits, increasing welfare dependence.
- Past reforms (2003) reduced some incentives, proving that policy can change behavior but also that political costs can freeze reforms.