TOP INCOME INEQUALITY IN ISRAEL

This paper is the first to estimate top income inequality in Israel using administrative microdata. Using tax records from 2008–18, we find that the top 1% earned 14.7% of the total income during this period, a relatively high estimate compared to other OECD countries. For the top 1-0.1%, we find that the main income sources were labor and business income, and for the top 0.1% the main income source was capital income, primarily dividends. During the period studied, and especially after 2015, top income shares decreased, mostly due to a decline in labor income inequality. Classifying economic industries of top earners, we find that the most common industries in the top 1-0.05% are medical practices, high tech, and legal services. For the top 0.05% these are management consultancy, wholesale trade, high tech and real estate. Lastly, we estimate intragenerational mobility rates between 2008 and 2018 using total income. We find that the probability of being in the top 1% in 2018 for those who started in the bottom nine deciles in 2008 was 0.2%, compared to 6.1% for those who started in the top 10-1%, 38.5% for those that started in the top 1-0.1%, and 54.7% for those who started in the top 0.1%.