The Effect of Russian Immigration on the Israeli Economy

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The Effect of Russian Immigration on the Israeli Economy


Executive Summary
Throughout history, there have been many periods of mass immigration of Russian Jews into Israel and the Middle East. Most recently, the fall of the Soviet Union has enabled over one million Russian Jews to move to Israel. As expected, this influx of people had a significant effect on Israel’s population and economy. The purpose of this essay is to discover what role this flood of immigrants played on Israel and Russia, and how each of the country’s economy has been affected by these changes. My findings show that Russian Jews played a significant role in the emergence of a successful Israeli market-based economy. Because the majority of Russian immigrants arrived in Israel with a high-level of education, the swell of intelligence allowed Israel to develop their high-tech industry into what has become a worldwide leader. As foreign investors began to notice the wealth of technological knowledge in Israel, venture capital in the country has increased, with many corporations such as Intel and Microsoft setting up manufacturing and R & D centers throughout the country. While the technology sector in Israel would have remained competitive without the fall of the Soviet Union, the influx of Russian brainpower to the country has certainly contributed to its worldwide prowess in the industry.


Throughout history, the infusion of Russian Jews into the Middle East has played a large role in the creation and development of the Israeli state. From the yishuvs of the early 1900s, which laid the foundation for the Israeli economy, on through immigrants of present day, each group has had an impact on the country. Over the past twenty years, the political and economic environments of both Israel and Russia have changed drastically, largely due to significant economic reforms which have helped their transformations. By looking at the economic histories of both countries, specifically since the fall of the Soviet Union, you can see the enormous changes which have occurred over the past 20 years. Many of these changes can be traced back to the effect of Russian immigration on Israel during this period, as well as in the past. The most significant result of this mass influx of brainpower has been the development of Israel’s high-tech industry, now a worldwide leader in technological development, and a hotbed for R & D, which has become the backbone of the Israeli economy.

Economic history of Israel
The economic history of Israel can be traced back as far as the late nineteenth century, prior to the establishment of the Jewish state. The influx of over half a million Jewish immigrants, from Russia and Eastern European countries into Palestine, helped form the foundation of the Israeli economy. This group of immigrants, known as the yishuv, focused much of their efforts on developing agricultural settlements, similar to a modern day Israeli Kibbutz. “The early emphasis on agriculture would prove lucrative in later years as Israeli agricultural productivity and innovation allowed the country to become largely self-sufficient in terms of food production, and a leading exporter of produce and agricultural technology. The yishuv economy, based largely on agriculture and small manufacturing, grew at an annual rate of 13.7 percent between March 1919 and December 1947.” After declaring independence in 1948, Israel’s economy was built to support three functions essential to its sustainability; the high cost of defending Israel from its surrounding neighbors, which also happened to be its biggest enemies, the cost of absorbing large amounts of immigrants, and the development of infrastructure including banks, financial systems and government agencies, which were all capital intensive projects. Less than four years later, Israel had welcomed nearly 800,000 immigrants, doubling its Jewish population, and was forced to implement an austerity...
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