The Herzliya Indices National Security Balance The Civilian Quantitative Dimension Herzliya Conference 2015 Prof. Rafi Melnick, IDC Herzliya
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Development of the Economic Dimension in Israel 1990-2014 64 62 60 58 56 54 52 50
Multiple Indicators Approach National Security Unobservable Latent Variable Indicator 1 Observable Indicator 2 Observable... Indicator N Observable N indicators are measurable; they affect and are affected by national security, which is an unobservable latent variable. The presence of multiple indicators allows (under defined assumptions) one to quantify national security. A rise in each indicator means improvement in national security, in the corresponding dimension.
Components of the Economic Indicator (Relative Weight in Parenthesis) 1. GDP Per Capita, PPP (16%) 2. GDP, PPP (15%) 3. Unemployment (15%) 4. General Government Gross Financial Liabilities (half weight 11%) 5. R&D Investment - Percent of GDP (11%) 6. Current Account Balance (11%) 7. Inflation (11%) 8. Long Term interest rate (5%) 9. Fiscal Deficit (5%)
The Model Construction of a panel data set of 27 countries The model includes: Israel 26 OECD countries Data ranges from 1990 through 2013
Economic Data Resources Primary Sources OECD Statistics OECD Economic Outlook Israel s National Insurance institute - Research and Planning Administration Israel s Central Bureau of Statistics Secondary Sources IFS International Financial Statistics (IMF) IMF World Economic Outlook Bank of Israel and various central banks Other sources
Methodology A preliminary base is calibrated. Each variable is measured in percentage change or percentage difference in the case that its basic measurement is in percents An annual weighted average is calculated using the weights obtained from a panel of experts The indices are formed, over time, by cumulating annual weighted averages
The Herzliya Indices 2015 RESULTS
Turkey Poland Hungary Greece Israel Korea, Rep Portugal lreland Czech Rep Spain New Zealand Finland Belgium ltaly Australia Austria Sweden Denmark Canada Netherlands France UK Norway Switzerland Germany Japan USA Economic Base - 1990 120 100 80 60 40 20 -
Turkey Greece Hungary Poland Portugal Spain Czech Rep Finland ltaly Israel New Zealand lreland Belgium Austria Korea, Rep France Sweden Denmark Australia Canada UK Netherlands Switzerland Norway Germany Japan USA Economic Base - 2014 120 100 80 60 40 20 -
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Development of the Economic Dimension Israel and the Developed Countries 80 75 70 65 60 55 50 45 Israel G7 Euroland OECD
Italy Finland Austria France Japan Netherlands Belgium Denmark Norway Greece Sweden Israel Germany Canada Turkey United States Portugal Spain Switzerland Czech Republic Australia United Kingdom New Zealand Korea Poland Hungary Ireland Per Capita GDP Growth - 2014 (percent) 5 4 3 2 1 0-1
Norway Korea Japan Switzerland Germany Austria New Zealand Israel Czech Republic Australia United States United Kingdom Denmark Netherlands Canada Hungary Sweden Belgium Finland Poland France Turkey Ireland Italy Portugal Spain Greece Unemployment Rate - 2014 (percent) 30 25 20 15 10 5 0
Turkey Norway Australia Korea New Zealand Switzerland Sweden Czech Republic Poland Denmark Finland Israel Netherlands Germany Canada United Kingdom Hungary Austria United States France Ireland Belgium Spain Portugal Italy Greece Japan General Government Liabilities - 2014 (percent of GDP) 250 200 150 100 50 0
Australia Korea New Zealand Czech Republic Ireland United Kingdom Norway Finland Poland Denmark Switzerland Sweden Netherlands United States Spain Hungary Germany Turkey Portugal Austria France Canada Israel Greece Italy Belgium Japan General Government Liabilities - 2003 (percent of GDP) 180 160 140 120 100 80 60 40 20 0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic Dimension Gap Israel and the Developed Countries 0.0-2.0-4.0-6.0-8.0-10.0-12.0-14.0-16.0-18.0-20.0 G7-Israel Euroland-Israel OECD-Israel
Economic Index 2014 1 USA 103.59 17 New Zealand 63.66 2 Japan 74.06 18 Israel 62.86 3 4 5 6 7 8 9 10 11 12 Germany 74.01 Norway 73.72 Switzerland 73.36 Netherlands 70.56 UK 70.41 Canada 69.80 Australia 68.98 Denmark 68.40 Sweden 68.37 France 67.17 19 20 21 22 23 24 25 26 27 ltaly 62.57 Finland 62.49 Czech Rep 58.96 Spain 57.98 Portugal 56.58 Poland 53.70 Hungary 51.54 Greece 50.40 Turkey 46.89 13 Korea, Rep 66.45 14 Austria 66.33 15 Belgium 64.83 16 lreland 64.79
The Herzliya Composite Economic Social Index
Components of the Economic-Social Indicator (Relative Weight in Parenthesis, Social indicators in yellow) 1. GDP Per Capita, PPP (11%) 2. GDP, PPP (10%) 3. Unemployment (10%) 4. Poverty Incidence (10%) 5. Inequality Gini (8%) 6. General Government Gross Financial Liabilities (8%) 7. R&D Investment - % of GDP (8%) 8. Current Account Balance (8%) 9. Long Term Unemployment (7%) 10. Employment Rate (7%) 11. Inflation (7%) 12. Long Term Interest Rate (3%) 13. Fiscal Deficit (3%)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Development of the Economic and Social Dimension in Israel 1990-2014 61 60 59 58 57 56 55 54 53 52
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Poverty Incidence in Israel 1979-2013 (Families, percent) 40 35 30 25 20 15 10 After taxes and transfers Before taxes and transfers
Czech Republic Denmark Finland Norway Netherlands France Germany Austria United Kingdom Belgium Sweden Ireland New Zealand Switzerland Hungary Poland Canada Portugal Italy Australia Korea Spain Greece Japan United States Israel Turkey Poverty Incidence (Families, the latest available data point, percent) 25 20 15 10 5 0
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Inequality in Israel 1979-2013 (Families, Gini Coefficient) 0.55 0.5 0.45 0.4 0.35 0.3 After taxes and transfers Before taxes and transfers
Norway Denmark Czech Finland Belgium Sweden Netherlands Austria Switzerland Hungary Germany Ireland Poland Korea France Canada Italy New Zealand Australia Greece Japan Portugal Spain United Israel United States Turkey Inequality (Families, the latest available data point, Gini coefficient) 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Long Term Unemployment in Israel 1995-2013 (percent) 3.0 2.5 2.0 1.5 1.0 0.5 -
Korea Norway New Zealand Israel Canada Australia Sweden Austria Japan Switzerland United States Denmark Finland Germany United Kingdom Netherlands Turkey Czech Republic Poland Hungary Belgium France Ireland Italy Portugal Spain Greece Long Term Unemployment (Families, the latest available data point, percent) 20 18 16 14 12 10 8 6 4 2 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Employment Rate Israel 1995-2014 (percent) 70 65 60 55 50
Greece Turkey Italy Spain Poland Ireland Hungary Belgium Portugal France Korea Israel United States Finland Czech Republic Austria Australia United Canada Japan Denmark Germany Netherlands New Zealand Sweden Norway Switzerland 90 80 70 60 50 40 30 20 10 Employment Rate (The latest available data point, Percent) 0
Turkey Poland Hungary Greece Israel Korea, Rep Portugal lreland Czech Rep Spain New Zealand Finland Belgium ltaly Australia Austria Sweden Denmark Canada Netherlands France UK Norway Switzerland Germany Japan USA Economic Social Base - 1990 120 100 80 60 40 20 -
Turkey Hungary Greece Poland Portugal Czech Rep Spain Israel Finland New Zealand ltaly lreland Korea, Rep Belgium Sweden Austria France Denmark Australia Canada Netherlands UK Norway Switzerland Germany Japan USA Economic Social Base - 2014 120 100 80 60 40 20 -
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Development of the Economic Social Dimension Israel and the Developed Countries 80.00 75.00 70.00 65.00 60.00 55.00 50.00 45.00 Israel G7 Euroland OECD
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic Social Dimension Gap Israel and the Developed Countries 0.0-2.0-4.0-6.0-8.0-10.0-12.0-14.0-16.0-18.0-20.0 G7-Israel Euroland-Israel OECD-Israel
Economic Social Index 2014 1 USA 101.83 17 ltaly 62.65 2 Japan 74.91 18 New Zealand 62.15 3 4 5 6 7 8 9 10 11 12 Germany 73.14 Switzerland 72.75 Norway 72.12 UK 70.12 Netherlands 69.30 Canada 68.52 Australia 67.02 Denmark 66.77 France 66.71 Austria 65.96 19 20 21 22 23 24 25 26 27 Finland 61.39 Israel 60.15 Spain 58.16 Czech Rep 57.93 Portugal 56.95 Poland 52.28 Greece 50.76 Hungary 50.24 Turkey 45.56 13 Sweden 65.87 14 Belgium 64.84 15 Korea, Rep 64.11 16 lreland 63.98
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Development of the Economic and the Economic Social Dimension a Comparison Israel and the Developed Countries 68.00 66.00 64.00 62.00 60.00 58.00 56.00 54.00 Israel Eco Euroland Eco Israel Eco-Social Euroland Eco-Social
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Economic and Economic Social Dimension Gap Israel and the Developed Countries 0.0-1.0-2.0-3.0-4.0-5.0-6.0-7.0-8.0 GAP Euroland-ISR Eco GAP Euroland-ISR Eco-Social
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