Prof. Rafi Melnick - IDC Herzliya February 20091 Herzliya Conference 2009 “The Herzliya Indices”...

Prof. Rafi Melnick - IDC HerzliyaFebruary 2009 1

Herzliya Conference2009

“The Herzliya Indices” National Security BalanceThe Civilian Quantitative

Dimension


Team MembersMs. Leah Achdut – The Ruppin Academic Center and

Van Leer Jerusalem Institute;

Dr. Michel Strawczynski – Bank of Israel

Mr. Tommy Steiner – IDC Herzliya

Dr. Zalman Shiffer – Economic Advisor

Team LeaderProf. Rafi Melnick - IDC Herzliya

With thanks the research division of the National Insurance Institute of Israel, Polina Dovman (Bank of Israel), and Gilad Skutelsky (IDC

Herzliya) for their assistance with research.

Herzliya Indices Team


45

47

49

51

53

55

57

59

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

Development of the Economic Dimension in Israel

1990-2008


90

91

92

93

94

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Development of the Social Dimension in Israel

1990-2007


50

55

60

65

70

75

80

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Development of the Governmental/ Political Dimension

in Israel 1996-2007


Dimensions of National Security

National Security

CivilianDimension

MilitaryDimension

SocialEconomic Governmental/Political


Multiple Indicators Approach

National SecurityUnobservable Latent Variable

Indicator N Observable

Indicator II Observable

Indicator I 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 theEconomic Indicator (relative weight in parenthesis)

1. GDP Per Capita, PPP (16%)

2. GDP, PPP (15%)

3. Unemployment (15%)

4. High-Technology Exports – % of Manufactured Exports (11%)

5. General Government Gross Financial Liabilities (11%)

6. Inflation Rate (11%)

7. Current Account Balance (11%)

8. Foreign Currency Reserves (10%)


1. Poverty Incidence (14%) *

2. Gini Inequality Coefficient (12%) **

3. Human Development Index – Education (11%) ***

4. Chronic Unemployment (10%)

5. Human Development Index – Life Expectancy (10%) ***

6. Rate of Participation in Labor Force – Men (10%)

7. Rate of Participation in Labor Force – Women (10%)

8. Human Development Index – GDP (9%) ***

9. Population Aged 65+ (7%)

10. Population Aged 15- (7%)

Components of theSocial Indicator (relative weight in parenthesis)


Components of theSocial Indicator (notes)

* Gini data:Israel data updated for 2007Countries` data updated for mid 2000’s except: Austria, Belgium, Egypt Greece, France, Hungary, Ireland, Italy, Poland, Portugal, Spain, Switzerland (updated for early 2000’s); Czech Republic (updated for mid 1990’s);Syria- No data.

** Poverty data:Israel data updated for 2007Countries` data updated for mid 2000’s except: Austria, Greece, Hungary, Iran, Ireland, Jordan, Netherlands (updated for early 2000’s); Czech Republic (updated for mid 1990’s)

*** HDI indicators: Last updated in 2005


1. Political Stability and the Absence of Violence (11%)

2. Rule of Law (11%)

3. Democracy (10%)

4. Political Rights (9%)

5. Civil Liberties (9%)

6. Control of Corruption (8%)

7. Quality of Regulation (8%)

8. Efficiency of Government (8%)

9. Voice and Accountability (8%)

10. Alliances (6%)

11. Membership in International Organizations (6%)

12. Hosted Embassies (6%)

Components of the Governmental/ Political Indicator (relative weight in parenthesis)


The Model

• Construction of a panel data set of 31 countries• The model includes:

– Israel– 26 OECD countries– 4 regional countries: Egypt, Iran, Jordan, and

Syria • Data ranges from 1990 through 2007• Israel’s economic data is through 2008


Economic Data Sources

Primary Sources• World Bank• IMF – World Economic Outlook• OECD Economic Outlook• Israel’s Central Bureau of Statistics

Secondary Sources• IFS – International Financial Statistics (IMF)• Economist Intelligence Unit-Iran• Bank of Israel and various central banks• Other sources


Social Data Sources

Primary Sources• OECD • Luxembourg Income Study• Israel’s Central Bureau of Statistics• National Insurance Institute of Israel• UN Human Development Reports

Secondary Sources• OECD, Labor Market Statistics Data LFS by sex• CIA• National Tobacco Information Online System• Statistical, Economic and Social Research and Training Center

for Islamic Countries• World Bank• Eurostat Data, Indicators of the 20 NewCronos


Primary Sources• World Bank• Freedom House • Polity IV Project• A.T. Kearny - Foreign Policy Magazine • Europe Yearbook• Treaties and Alliances of the World

Governmental/Political Data Sources


Methodology

• A preliminary base is calibrated for each dimension• 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


Herzliya Indices 2009Results


0

20

40

60

80

100

120

Jord

an

Syr

ia

Iran

Po

lan

d

Tu

rkey

Cze

ch R

ep

Eg

ypt

Hu

ng

ary

Isra

el

Po

rtu

gal

Gre

ece

lrel

and

Ko

rea,

Rep

New

Zea

lan

d

Sp

ain

Sw

eden

Fin

lan

d

Den

mar

k

Au

stra

lia

Bel

giu

m

Au

stri

a

Net

her

lan

ds

Can

ada

No

rway

ltal

y

UK

Sw

itze

rlan

d

Fra

nce

Ger

man

y

Jap

an

US

A

Economic Base | 1990


0

20

40

60

80

100

120

Jord

an

Syr

ia

Iran

Cze

ch R

ep

Tu

rkey

Po

lan

d

Eg

ypt

Hu

ng

ary

Po

rtu

gal

Gre

ece

Isra

el

New

Zea

lan

d

Ko

rea,

Rep

Sp

ain

lrel

and

Sw

eden

Fin

lan

d

Bel

giu

m

Au

stri

a

Den

mar

k

Au

stra

lia

ltal

y

Net

her

lan

ds

No

rway

Sw

itze

rlan

d

Can

ada

Fra

nce U

K

Ger

man

y

Jap

an

US

A



0

20

40

60

80

100

120

Jord

an

Syr

ia

Iran

Tu

rkey

Cze

ch R

ep

Po

lan

d

Eg

ypt

Hu

ng

ary

Po

rtu

gal

Gre

ece

Isra

el

New

Zea

lan

d

Sp

ain

Ko

rea,

Rep

lrel

and

Sw

eden

Fin

lan

d

Bel

giu

m

Au

stri

a

Den

mar

k

Au

stra

lia

ltal

y

Net

her

lan

ds

Sw

itze

rlan

d

Can

ada

No

rway

Fra

nce U

K

Ger

man

y

Jap

an

US

A



Development of the Economic Dimension Israel and the Developed Countries

45

50

55

60

65

70

75

80

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Israel G7 Euroland OECD


25

30

35

40

45

50

55

60

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Israel Iran Jordan Egypt Syria

Development of the Economic Dimension Israel and Regional Countries


-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

3

Isra

el

Jap

an

Fra

nce

Syr

ia

Ger

man

y

US

A

Po

rtu

gal

No

rway

Net

her

lan

ds

Sw

itze

rlan

d

Au

stri

a

ltal

y

Sw

eden

Can

ada

lrel

and

Fin

lan

d UK

Den

mar

k

Eg

ypt

Bel

giu

m

Po

lan

d

Jord

an

Gre

ece

Tu

rkey

Au

stra

lia

Ko

rea,

Rep Iran

Hu

ng

ary

Cze

ch R

ep

Sp

ain

New

Zea

lan

d

Economic Change (percent) | 2000-2003


0

1

2

3

4

5

6

7

Po

rtu

gal

No

rway

Jord

an

Jap

an

ltal

y

US

A

lrel

and

Fra

nce

Sw

itze

rlan

d

New

Zea

lan

d UK

Sp

ain

Au

stra

lia

Bel

giu

m

Ger

man

y

Au

stri

a

Eg

ypt

Net

her

lan

ds

Can

ada

Sw

eden

Syr

ia

Hu

ng

ary

Ko

rea,

Rep

Den

mar

k

Fin

lan

d

Gre

ece

Iran

Isra

el

Cze

ch R

ep

Tu

rkey

Po

lan

d

Economic Change (percent) | 2003-2008


-1

-0.5

0

0.5

1

1.5

2

No

rway

lrel

and

Iran

US

A

Po

rtu

gal

ltal

y

Au

stra

lia

Sp

ain

Fra

nce

Can

ada UK

New

Zea

lan

d

Jap

an

Bel

giu

m

Hu

ng

ary

Sw

itze

rlan

d

Ko

rea,

Rep

Au

stri

a

Jord

an

Sw

eden

Den

mar

k

Net

her

lan

ds

Gre

ece

Ger

man

y

Cze

ch R

ep

Isra

el

Tu

rkey

Fin

lan

d

Syr

ia

Eg

ypt

Po

lan

d

Economic Change (percent) | Marginal 2007


-1

-0.5

0

0.5

1

1.5

2

Eg

ypt

Jord

an

Syr

ia

lrel

and UK

Sp

ain

ltal

y

Jap

an

US

A

Po

rtu

gal

Fra

nce

Sw

itze

rlan

d

New

Zea

lan

d

Can

ada

Bel

giu

m

Tu

rkey

Au

stra

lia

Sw

eden

No

rway

Fin

lan

d

Net

her

lan

ds

Den

mar

k

Au

stri

a

Ger

man

y

Ko

rea,

Rep

Isra

el

Iran

Po

lan

d

Gre

ece

Cze

ch R

ep

Hu

ng

ary

Economic Change (percent) | Marginal 2008


Economic Index 200817

18

19

20

21

22

23

24

25

26

27

28

29

30

31

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

USA 110.7

Japan 77.6

Germany 73.2

UK 69.1

France 68.6

Norway 68.5

Canada 68.4

Switzerland 68.4

Netherlands 68.1

ltaly 66.2

Australia 65.4

Denmark 65.4

Austria 65.1

Belgium 64.4

Finland 63.5

Sweden 63.2

lreland 62.0

Korea, Rep 61.9

Spain 61.7

New Zealand 60.8

Israel 58.3

Greece 57.5

Portugal 53.6

Hungary 52.2

Egypt 50.1

Poland 46.0

Czech Rep 45.5

Turkey 45.3

Iran 40.0

Syria 32.2

Jordan 32.0


0

20

40

60

80

100

120

Syr

ia

Iran

Eg

ypt

Jord

an

Tu

rkey

Gre

ece

Ko

rea,

Rep

Isra

el

lrel

and

Sp

ain

Po

rtu

gal

ltal

y

Po

lan

d

New

Zea

lan

d

Bel

giu

m

Hu

ng

ary

Jap

an

Fra

nce

Ger

man

y

Net

her

lan

ds

Cze

ch R

ep US

A

Au

stra

lia UK

Sw

itze

rlan

d

Au

stri

a

Can

ada

No

rway

Fin

lan

d

Den

mar

k

Sw

eden

Social Base | 1990


0

20

40

60

80

100

120

Syr

ia

Iran

Eg

ypt

Jord

an

Tu

rkey

Isra

el

Ko

rea,

Rep

Gre

ece

Po

lan

d

ltal

y

Po

rtu

gal

Sp

ain

lrel

and

New

Zea

lan

d

Bel

giu

m

Cze

ch R

ep

Hu

ng

ary

US

A

UK

Jap

an

Ger

man

y

Fra

nce

Au

stra

lia

Net

her

lan

ds

Sw

itze

rlan

d

Au

stri

a

Can

ada

Fin

lan

d

No

rway

Sw

eden

Den

mar

k

Social Base | 2007


90

92

94

96

98

100

102

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07


Development of the Social Dimension Israel and the Developed Countries


65

70

75

80

85

90

95

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

Israel Egypt Iran Jordan Syria

Development of the Social Dimension Israel and Regional Countries


-0.9

-0.4

0.1

0.6

1.1

Ko

rea,

Rep

Po

lan

d

Isra

el

Tu

rkey

Net

her

lan

ds

US

A

Bel

giu

m

Ger

man

y

Fin

lan

d

Eg

ypt

Jap

an

No

rway

Den

mar

k

Cze

ch R

ep UK

New

Zea

lan

d

Sw

eden

Au

stri

a

Au

stra

lia

Fra

nce

Sw

itze

rlan

d

lrel

and

Po

rtu

gal

Can

ada

Sp

ain

Hu

ng

ary

Jord

an

ltal

y

Gre

ece

Iran

Syr

ia

Social Change | 2000-2003


-0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

US

A

Sw

itze

rlan

d

Isra

el

No

rway U

K

Po

rtu

gal

Fra

nce

Cze

ch R

ep

Hu

ng

ary

Can

ada

Net

her

lan

ds

Fin

lan

d

Den

mar

k

ltal

y

Bel

giu

m

Jap

an

Au

stra

lia

Tu

rkey

Po

lan

d

Gre

ece

Iran

Sw

eden

Au

stri

a

Ger

man

y

Jord

an

Ko

rea,

Rep

New

Zea

lan

d

Syr

ia

lrel

and

Eg

ypt

Sp

ain

Social Change | 2003-2007


-0.2

-0.1

0

0.1

0.2

0.3

0.4

Tu

rkey UK

US

A

Hu

ng

ary

ltal

y

Cze

ch R

ep

Ko

rea,

Rep

Den

mar

k

Syr

ia

Jord

an

Gre

ece

Po

rtu

gal

Fra

nce

New

Zea

lan

d

Fin

lan

d

Sw

itze

rlan

d

Au

stra

lia

Eg

ypt

Sw

eden

Can

ada

Iran

Sp

ain

No

rway

Jap

an

Ger

man

y

lrel

and

Bel

giu

m

Po

lan

d

Au

stri

a

Isra

el

Net

her

lan

ds

Social Change | Marginal 2007


Social Index 200717

18

19

20

21

22

23

24

25

26

27

28

29

30

31

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

Denmark 107.1

Sweden 105.8

Norway 104.9

Finland 103.9

Canada 103.1

Austria 103.0

Switzerland 102.7

Netherlands 102.5

Australia 102.0

France 101.2

Germany 100.7

Japan 100.5

UK 100.2

USA 100.0

Hungary 99.5

Czech Rep 99.3

Belgium 98.9

New Zealand 98.0

lreland 97.3

Spain 97.2

Portugal 96.7

ltaly 96.2

Poland 95.1

Greece 94.0

Korea, Rep 93.1

Israel 93.1

Turkey 83.3

Jordan 79.3

Egypt 76.4

Iran 73.5

Syria 73.1


0

20

40

60

80

100

120

Iran

Syr

ia

Eg

ypt

Tu

rkey

Jord

an

Ko

rea,

Rep

Isra

el

Po

lan

d

Gre

ece

Hu

ng

ary

Cze

ch R

ep

ltal

y

Jap

an

Sp

ain

Po

rtu

gal

lrel

and

Au

stra

lia

Fra

nce

New

Zea

lan

d

Fin

lan

d

Au

stri

a

Bel

giu

m

Ger

man

y

Sw

itze

rlan

d

Sw

eden

No

rway

Den

mar

k

UK

Net

her

lan

ds

Can

ada

US

A

Governmental/ Political Base | 1996


0

20

40

60

80

100

120

Syr

ia

Iran

Eg

ypt

Jord

an

Tu

rkey

Isra

el

Ko

rea,

Rep

Po

lan

d

Gre

ece

Hu

ng

ary

Cze

ch R

ep

ltal

y

Sp

ain

Jap

an

Po

rtu

gal

lrel

and

Fra

nce

New

Zea

lan

d

Au

stra

lia

Bel

giu

m

Au

stri

a

Fin

lan

d

Sw

itze

rlan

d

No

rway

Sw

eden U

K

Ger

man

y

Net

her

lan

ds

Den

mar

k

US

A

Can

ada

Governmental/ Political Base | 2007


65

70

75

80

85

90

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07


Development of theGovernmental/ Political Dimension Israel and the Developed Countries


25

35

45

55

65

75

85

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Israel Egypt Iran Jordan Syria

Development of theGovernmental/ Political Dimension Israel and Regional Countries


-3

-2

-1

0

1

2

3

Sp

ain

Iran

Po

rtu

gal

ltal

y

Gre

ece

Syr

ia

Hu

ng

ary

Bel

giu

m

Fin

lan

d

Po

lan

d

Sw

eden

Fra

nce

US

A

Den

mar

k

New

Zea

lan

d

Can

ada

No

rway

Net

her

lan

ds

Cze

ch R

ep

Eg

ypt

UK

Ger

man

y

Au

stra

lia

Au

stri

a

Sw

itze

rlan

d

Jap

an

Jord

an

lrel

and

Tu

rkey

Isra

el

Ko

rea,

Rep

Political Change | 2003-2007


-1

-0.5

0

0.5

1

1.5

2

Hu

ng

ary

Fin

lan

d

Jap

an

Bel

giu

m

Gre

ece UK

Fra

nce

Iran

Cze

ch R

ep

Isra

el

US

A

Can

ada

Sp

ain

Po

rtu

gal

New

Zea

lan

d

Den

mar

k

Ger

man

y

Tu

rkey

Au

stra

lia

No

rway

ltal

y

Po

lan

d

Eg

ypt

lrel

and

Sw

itze

rlan

d

Au

stri

a

Jord

an

Sw

eden

Syr

ia

Net

her

lan

ds

Ko

rea,

Rep

Political Change | Marginal 2007


Governmental/ Political Index 20071

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

Canada 100.7

USA 98.5

Denmark 96.2

Netherlands 96.0

Germany 95.4

UK 95.0

Sweden 94.9

Norway 94.8

Switzerland 94.6

Finland 93.9

Austria 93.7

Belgium 93.6

Australia 91.5

New Zealand 91.2

France 90.5

lreland 89.7

Portugal 86.9

Japan 86.7

Spain 85.1

ltaly 82.7

Czech Rep 81.1

Hungary 81.0

Greece 78.4

Poland 78.3

Korea, Rep 75.1

Israel 72.4

Turkey 59.1

Jordan 56.2

Egypt 50.5

Iran 30.2

Syria 30.1


Summary: Latest Developments

0

0.5

1

1.5

2

2007 2008

The Herzliya Indices: Crisis and Recovery

Economic Social Political

1. The Herzliya Indices of National Security are all positive in 2007. The strongest improvement is in the economic dimension, which continues to evolve in 2008. The improvements in the social and governmental/political dimensions are small, although they represent a positive progress compared with the previous negative trends. We expect that the world crisis will have a negative impact on all the National Security dimensions in 2009.


Summary: Latest Developments

0

0.5

1

1.5

2

2007 2008

The Herzliya Indices: Crisis and Recovery

Economic Social Political

1. The economic dimension shows a very strong improvement, which is stronger than the improvement observed in the other countries in our sample; nevertheless we do not see a change in the relative position of Israel vis-à-vis the other countries in our sample

2. The improvement in the social dimension represents a change from the negative past trend. The economic improvement had a positive impact in the social dimension through improvements in the rate of participation of women and man and a reduction the chronic rate of unemployment.

3. In the governmental/political dimension, we also record a very slight improvement but the level of this index remains in the lower part of the distribution of our sample.

Prof. Rafi Melnick - IDC Herzliya February 20091 Herzliya Conference 2009 “The Herzliya Indices”...

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