ed GNP growth would have made this the case. However, as mentioned above, the economy benefited from a large capital import which allowed it to record its achievements. This left enough to allow private households to improve their standard of living. Until 1970, per capita private consumption rose by an average annual rate of some 4.7%, and has risen by about 3.2% since then. While there were a few years in which this consumption dropped, most of these during the second period, there have been more than 40 years in which per capita private consumption increased (at levels ranging from 1 to 11 percent), a noteworthy achievement. In this context, it is no less noteworthy that during this period the citizens of Israel showed restraint and did not spend all of their personal income. Rather, they behaved economically, saving a significant part of it - thus contributing to the investment possibilities of the country and allowing the economy to become that much less reliant on imported capital. The rate of private savings in Israel is one of the highest in the world. During the country's first decade, the proportion of private disposable income that was set aside as savings never dropped below 29%. At the beginning of the 60s, this ratio fell to 21%, but it then climbed up to 38% in 1972. In the following decade, the savings rate dropped to 34%, then to 29% in 1985 and 25% in 1996.Reduction of Economic InequalityAs in all Western countries, a progressive income tax system in Israel serves to reduce inequality of income between individuals in the economy. This is accomplished by taking about half of the income of the richest individuals (those belonging to the highest deciles on the basis of income) while granting an exemption from income tax to those in the lowest income deciles. Income inequality is further reduced through a system of social transfer payments to complement income of those in need, using a variety of criteria, by the National ...
