BANK OF ISRAEL
Office of the Spokesperson and Economic Information
March 5, 2014
Press Release
Excerpt from the "Bank of Israel – Annual Report for 2013" to be published soon:
Is employment in export industries more volatile than employment in industries
oriented toward the domestic market?
 The employment level in export industries is more volatile than in domesticmarket oriented industries.
 Despite this, due to the dynamism of the export industries, the personal
employment situation in those industries is more stable than in the rest of the
business sector.
Israeli exports are concentrated for the most part in high technology industries. The
exports of those industries constitute more than 40 percent of total goods and services
exports, excluding diamonds. In contrast with nontradable industries (domestic services,
commerce and the construction industry), activity in which is influenced mainly by
domestic factors, activity in export industries is affected by both domestic and external
factors—some of which are unforeseen, such as demand from abroad, changes in the
terms of trade1 and changes in the exchange rate. The multiplicity of factors affecting
export industries increases the volatility of their output, which should lead to volatility in
employment. It is expected that in exporting industries there will be more frequent and
wider-ranging changes in the size of the workforce than in the nontradable industries or
in the domestic-oriented manufacturing industries.
In fact, an examination of employment data in the prominent export industries from
1996–2011, and a comparison of those data with employment data in the business sector
industries whose activity is oriented toward the domestic market, shows that throughout
the examined years, export industries were characterized by greater volatility in labor
inputs. In manufacturing, the volatility gap derives mainly from volatility in the number
of employed persons, while in the services, both the number of employed persons and the
average number of work hours per full-time employee are much more volatile than the
parallel data in the domestic-market oriented industries. It seems that the exporting
industries have the ability to adapt to changes in the economic environment and to
respond to them rapidly, due to the elasticity of employment in those industries.
1
The ratio between the development of dollar prices of exports and dollar prices of imported raw materials.
Bank of Israel - Volatile in employment
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Despite the volatility of employment in export industries, the employment status of
employees in those industries is more stable than that of other people employed in the
business sector (see the Figure below). It seems that individuals who have lost their job in
these industries manage to rapidly return to employment both due to the dynamism of the
advanced industries and the relatively rapid expansion of employment in these industries,
and due to certain personal qualities and a high level of education.
In order to assess the unique structural effect of export industries on the employment
stability of those employed in those industries, we neutralized the effects of other factors
that may have an impact on individuals’ success in maintaining employment continuity.
For this purpose, we used a logit regression to estimate the probability of remaining
employed or becoming unemployed as a function of the level of education, family and
demographic characteristics of the individual, and employment in one of three groups of
industries: the prominent export industries in manufacturing and services, domesticmarket oriented manufacturing industries, and domestic-market oriented services
industries.
The results indicate that even after taking the other factors into account, the probability of
a person employed in the export industries remaining employed in the following quarter
is 70 percent higher than the parallel data of a similar person employed in domesticmarket oriented services, and 50 percent higher than a similar person employed in
domestic-market oriented manufacturing. In contrast, the probability of becoming
unemployed in manufacturing or in services oriented toward the domestic market is about
50 percent higher than the parallel data in the export industries.
Bank of Israel - Volatile in employment
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