Mineral resources and growth in a small, open economy. The Case of Israel

The paper focuses on mineral resources availability and a country's long-term economic growth potential. Israel represents the case of a small, open, developed economy whose industry and agriculture vitally depend on imported raw materials of mineral origin (energy and non-fuel minerals), which in turn provide for the production of the country's exportable goods. A multisector, multi-period, inter-industry planning model is employed for analyzing the role of these natural resources in the development of the Israeli economy. The version of the model discussed here spans a thirty-year horizon, with six five-year periods. Its economic-engineering relationships of the production and consumption sectors of the economy serve to analyze the long-run growth potential under alternative assumptions. These relationships represent the interdependencies among 28 production sectors, consumption and investment activities, and the input of capital, labor energy, and imported raw materials. It allocates the available resources to achieve an optimal temporal consumption path. Balance of payment considerations, substitution possibilities (specially capital for energy), and international market developments are the main features of the various scenarios investigated.