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Abstract
This study examines conceptual problems in measuring product and disposable
income of the kibbutz and in comparing them with the relevant
national data. The inquiry was prompted by Kroll and Polovin’s paper in
this Journal (1997), in which the authors found that per capita product and
disposable income of the kibbutz are significantly lower than the national
average in Israel. To carry out the analysis, we develop a formal-conceptual
model of a national economy which consists of several sectors. Using this
model it is shown that the “terms of trade” between the sectors – and the
income transfers involved – have a marked effect on the per capita income
in each sector, independent of its own productivity. In particular, two
downward accounting biases may account for the results of Kroll and
Polovin, regarding the kibbutz economy: the “interest effect” and the “tax
effect”. We hope that this analysis will contribute to a better understanding
of this issue, and also – more generally – to the national accounting theory.