Common property have long been considered inefficient and short lived, since they encourage high-productivity individuals to leave and shirking among those who stay. In contrast, kibbutzim --- voluntary common property settlements in Israel --- have lasted almost a century. Recently, about 75% of kibbutzim abandoned their equal-sharing rule and paid differential salaries to members based on their contributions. To explain the long persistence of the kibbutzim, as well as the recent privatization of income, a model of public defense is developed, which attributes equal sharing to the need of inducing high defense in the presence of external threats, and attributes income privatization to the decline of external threats. The insights of the model are supported by the institutional evidence in Chapter 4. In addition to the private income, the kibbutzim also forbade privacy, personal child rearing, and private consumptions. Those measures prevented members from free-riding on the public defense, thereby inducing a strong defense. As a result, the members successfully defended their settlements in civil and military conflicts, thereby consolidating the Jewish territory. In addition to the institutional evidence, the theoretical model yields two predictions: (1) other things equal, a central planner places equal-sharing income communities in dangerous areas, while placing private income communities in safe areas; (2) communities maintain equal-sharing rules in relatively dangerous environments, while privatizing income when the external threats decrease. To test prediction (1), a settlement dataset is constructed to study the location pattern of rural Jewish settlements. The empirical results in Chapter 5 and 6 reveal that the Jewish leadership systematically placed the kibbutzim at peripheral areas to expand the Jewish territory, and at the frontiers along the attacking routes to delay the offence, thereby protecting the Jewish territory. To test prediction (2), a kibbutz dataset is constructed to study the asymmetric timing of the income privatization. The empirical results in Chapter 7 show that a safer environment in terms of a lower number of nearby conflicts significantly increases the probability for a kibbutz to shift away from equal sharing. The results are robust when using rainfall at the nearby refugee camp as an instrument for the conflicts.
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Thesis advisor: Allen, Douglas
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