Lessons from the Kibbutz on the EqualityIncentives Trade-off

T he fi rst kibbutz, called Degania, was established southwest of the Sea of Galilee in 1910, but the vast majority of kibbutzim were established in the 1930s and 1940s, shortly before the creation of the state of Israel in 1948. The stereotypical view emphasizes that the founders of kibbutzim were often socialist idealist Jews from Eastern Europe. They migrated to the area of the Middle East that is now modern-day Israel, rejected capitalism, and attempted to create an egalitarian society based on Marxist principles. They aimed to create a “new human being” who cared about the group more than about himself, a homo sociologicus who would challenge the selfi sh homo economicus. This idealistic view can explain many of the key features of kibbutzim: equal sharing in the distribution of income; no private property; a noncash economy; communal dining halls where members ate their meals together; high provision of local public goods for use by kibbutz members; separate communal residences for children outside their parents’ homes, which were supposed to free women from their traditional role in society and allow them to be treated equally with men; collective education to instill socialist and Zionist values (Dror, 2001); communal production, whereby kibbutz members worked inside their kibbutzim in agriculture or in one of the kibbutz plants; and no use of hired labor from outside kibbutzim—because hiring labor was considered “exploitation” under the reigning socialist ideology. To an economist, steeped in thinking about incentives that self-interested individuals face, there are three reasons why an equal-sharing arrangement of this sort seems unlikely to last. First, high-ability members have an incentive to exit equalsharing arrangements to earn a wage premium—so-called “brain drain.” Second, Lessons from the Kibbutz on the Equality–Incentives Trade-off