The Economic Consequences of the Use and Control of Land Resources by the Defense Sector in Israel

This article presents and analyzes the economic implications of the use land resources for national defense on both the civilian and defense sectors in Israel and discusses means to increase the efficiency of this use. It introduces a theoretical framework for the analysis of the role of land in a two-period civilian-military model subject to the operation of significant externalities. Using this model we define efficiency conditions and point to potential areas of inefficiency. We next turn to the analysis of the role of land in the definition of the targets of defense policy and the means of their implementation and present data on the extent and composition of land use by the defense sector. We also analyze the specific channels through which defense uses of land affect civilian economic activities. On this background, we discuss the possible ways of evaluating the costs of the use of land by the defense sector and provide a first indicative estimate of a central component of those costs- the alternative cost of the land use for housing. Finally, we analyze the implications of the ongoing project of evacuation of military bases from urban areas and their surrounding, review the progress of this project and discuss alternative approaches to increasing the efficiency of the use of land by the defense sector. On the basis of this analysis we recommend the imposition of rent payments on land controlled by the defense sector and the development of mechanisms for improving the dual civilian-defense use of land.