The Economics of Kibbutzim

Brad Plumer on the economics of kibbutzim:

Brad Plumer: How Kibbutzes Work: Israeli kibbutzes have always struck me as quite fascinating. Here you have voluntary "socialist" communities—in which income equality is more-or-less guaranteed and all property is communal—that have persisted for most of the 20th century. ... By all accounts, they're still going strong. And that raises all sorts of questions: How do they do it? How do kibbutzes manage to keep their most productive workers from leaving? How do they stop workers from shirking? And so on.

Well, lucky for me, Ran Abramitzky of Stanford wrote a nifty paper last December that looked at some of these questions. Here's a link. It appears that kibbutzes prevent people from fleeing through communal ownership of property. If a super-productive worker believes she's getting shafted by being forced to share her earnings, she can always leave, but she won't be able to take any of her belongings with her. Understandably, people are reluctant to leave. (As well, those raised on a kibbutz tend to have learned kibbutz-specific skills, such as agronomy, which also makes exit difficult.)

Beyond that, kibbutzes seem to prevent workers from shirking through "mutual monitoring" and "peer pressure," carried out through institutions such as the communal dining hall (not to mention lots and lots of gossip). They also place restrictions on people entering from the outside in order to avoid adverse selection and getting saddled with too many unproductive workers. That all makes sense.

But that doesn't mean kibbutzes can survive all manners of adversity. In fact, they've been seriously weakening of late. Between 1983 and 1995—when a bank crisis, combined with high interest rates and a collapse in farm prices, caused a major wealth shock in the kibbutzes—20 percent of kibbutz members left...

Anyway, after the crisis of the 1980s, many of Israel's kibbutzes actually moved away from their commitment to full income equality. 39 kibbutzes didn't change at all; but 64 kibbutzes kept most income sharing while allowing varying degrees of differential pay at the margin; and 110 kibbutzes essentially transformed themselves from socialist communes into "social democracies"—letting members keep the bulk of their own earnings, while maintaining a safety net based on income sharing.

Interestingly, Abramitzky found that a kibbutz's ideology had no effect on what level of equality it adopted after the 1980s. ... For the most part, the poorer kibbutzes with the most people leaving were the ones most likely to induce lower levels of equality. And those kibbutzes that shifted away from full equality were better able to stem the flow of people leaving. (On the other hand, the wealthier the kibbutz, the better it was able to maintain high levels of equality.) Abramitzky notes that these findings run counter to "the view of Kibbutzes as primarily ideological entities." Kibbutz members are actually quite responsive to economic incentives...