Not-for-profit Organisations in Israel

This article includes a description of the not-for-profit organisation sector in the Israeli economy with an attempt to explain its evolution. The approach combines economic theory together with history and ideology to provide a multidimensional explanation of this important phenomenon. The focus is on the question of why some activities are performed by not-for-profit organisations instead of, or in addition to, for-profit firms and government institutions. In other words, the article does not address any question to the nature of the activities, but rather to the characteristics of the supplying organisations. The factors that are mentioned in the article as being possible explanations for the existence of NPOs in various fields of public service in Israel are the following: important traditions from Europe concerning the role of Church and State in providing social, cultural, educational, and health services to the population; the socialist ideology that prevailed among the first Jewish immigrants to Palestine at the turn of the twentieth century; budgetary convenience that causes the government to sponsor the supply of various public goods by the intermediary of NPOs, rather than supplying them directly through government agencies; and finally, the contract failure effect that encourages private donations and government subsidies to NPOs, and generates a demand for their services. There certainly are other factors playing a role in explaining the existence of specific NPOs. Their identification calls for a meticulous survey of NPOs in which the specific factors for each organisation are revealed. Nevertheless, there is no doubt, that when trying to provide a general explanation for the phenomenon, the above multidimensional approach serves on a wide and stable conceptual basis.