The Composition and Growth of the Defense Budget

One of the most important elements of Israel's economic structure is the very high level of defense expenditure. Israel spends more per capita on defense than most Western countries and has done so for more than twenty years. In 1989 annual per capita expenditure was $1,402 in Israel, $1,166 in the United States, and $602 in the United Kingdom.1 Defense expenditure equalled 15.2 percent of gross domestic product (GDP) in Israel, 5.6 percent in the United States, and 4.2 percent in the United Kingdom. This chapter examines the development of the defense sector and its role in the economy since the Yom Kippur War in 1973.