The Economics of Jerusalem
Leila Farsakh
University of Massachusetts Boston
CIS- MIT
New York, June 12 2006
The Economics of Jerusalem
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What are the economic realities of Jerusalem today
and how can they impact the future?
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Economic growth in Jerusalem has relied on 3 main
factors:
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Its religious dimension: a double edged sword
Population growth
State intervention
Can it be any different in the future: markets versus states,
globalization versus nations
Which Jerusalem?
 East and West
 Municipal Jerusalem
 Greater Jerusalem
 Metropolitan Jerusalem
 The Wall: Israel and the West
Bank
Religion and Jerusalem
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Its raison d’etre, but is it also its source of growth?
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Potentially a means to generate growth via its effect on
Tourism:
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Tourism generates $2.4-4.5 billion, roughly 4% of Israel’s GNP
Jerusalem accounts for 31% of all overnight staying tourists 2004,
higher than Tel Aviv
Yet it accounts for 20% of total income from tourism
Income from accounts for 20% of the Jerusalem city’s income
Historically an obstacle to economic activity
Source: Israeli Central Bureau of Statistics
The population of Municipal Jerusalem, 2005:
Consumers or Producers?
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67% of the population is Jewish
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30% of which are Haredi, or ultra-orthodox, Jews
31% of the population under the age of 15
22% of households live under the poverty line
33% of the population are Palestinian
-
41% of the population under the age of 15
42% of live under the poverty line
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Jerusalem is considered one of the poorest cities in Israel, per
capita income is 1/3 the Israeli national average
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Migration: More people leaving Jerusalem than entering it:
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Net loss of 81,700 residents between 1990 and 2002, 50% of which moved to
metropolitan Jerusalem
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Source: ICBS, Statistical Abstract of Jerusalem
The Labor Force in Jerusalem
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Less than 32% of the population is economically
active compared with 40% in Tel Aviv
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Increasing number of foreign workers:
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estimated 20% of the estimated 250,000-350,000 foreign
workers live in Israel, mainly in low skilled jobs
Different economic structure between Israelis and
Palestinians
The Economically Active Jerusalemites:
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Israelis
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49% of all employment in the public sector
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26% in tourism industry
10% in high tech, a particularly growing and promising sector
49% work in East Jerusalem
51% in work West Jerusalem
59% of the population living in Metropolitan Jerusalem work in
Municipal Jerusalem,
Jewish Sector of the city growing between 2-4% per annum
since 1996
Source: ICBS: Statistical Yearbook of Jerusalem
Employment Distribution in
Jerusalem and Tel-Aviv, 2005
60%
50%
Jerusalem
40%
Tel-Aviv
30%
20%
10%
rt
y
Po
ve
en
t
ne
m
pl
oy
m
U
To
ur
ism
ur
in
g
M
an
uf
ac
t
to
r
Bu
si
ne
ss
Se
c
Pu
bl
ic
se
c
to
r
0%
Source: Israeli Central Bureau of Statistics
The Economically Active Jerusalemites:
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Palestinians
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85% of total employment in the private sector
20% in construction, mainly in the Israeli sector
 27% in commerce and tourism
 5% in public services
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55% work in West Jerusalem
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44% work in East Jerusalem
Economic activity in East Jerusalem has been falling
by 10% since 2000
Implications for the Future
Changing demographics:
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More people leaving Jerusalem than those living in it
Jerusalem more a dormitory than an economic hub?
How can the future change this tendency
The doubling of the Palestinian population by 2050:
how to deal with them:
Population in Municipal Jerusalem, 1995-2050
80%
70%
60%
50%
40%
30%
20%
10%
0%
1995
2005
Jewish population
2015
2020
2050
Arab population
Source: ICBS: Statisti
of Jerusalem
Sources of Growth for the Future
Religion:
 Population growth:
 State versus market:
 Globalization: of industries and people
 Investment in technology
 Open borders
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