Working Paper: NBER ID: w30186
Authors: Ran Abramitzky; Netanel Benporath; Shahar Lahad; Victor Lavy; Michal Palgi
Abstract: We study the effects of labor market liberalization on political behavior and attitudes towards free-market capitalism and socialism, exploiting a reform whereby the Israeli socialist communities called kibbutzim shifted from equal sharing to market-based wages. Our identification strategy relies on this reform's sharp and staggered implementation in different kibbutzim. We first examine changes in behavior associated with this labor market liberalization and document that the reform led to a shift in electoral voting patterns, resulting in decreased support for left-wing political parties and increased support for the center and right parties in national elections. Using annual survey data on attitudes over 25 years, we show that the reform led to increased support for free-market policies such as full privatization and differential wages. Moreover, it decreased support for socialist policies such as the joint ownership of production means. Yet, the reform increased support for the safety net to support weak members through mutual guarantee. These effects appear to be driven by an increase in living standards and work ethics that resulted from the reform. We conclude that introducing market-based wages led to a shift in attitudes towards a market economy with compassion, revealing a change in members’ support from their traditional democratic socialist model to a social democratic model.
Keywords: labor market liberalization; political behavior; free market; socialism; kibbutzim
JEL Codes: B14; J5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor market liberalization in Israeli kibbutzim (J48) | Shift in electoral voting patterns (K16) |
| Shift in electoral voting patterns (K16) | Decreased support for left-wing political parties (P16) |
| Shift in electoral voting patterns (K16) | Increased support for center and right parties (D79) |
| Labor market liberalization in Israeli kibbutzim (J48) | Ideological transition away from socialism (P39) |
| Labor market liberalization in Israeli kibbutzim (J48) | Increased support for free market mechanisms (P10) |
| Labor market liberalization in Israeli kibbutzim (J48) | Decreased support for socialist policies (P27) |
| Improvements in living standards and work ethics (J89) | Shift in electoral voting patterns (K16) |