Privatization of the kibbutz and the demand for money

This article studies a unique case of transition to capitalism that involves adjustment to money: the privatization of the Israeli kibbutz system. Kibbutz members in Israel had refrained from using money for decades. The bankruptcy of the kibbutz system compelled them to enter the national monetary economy in the 1990s, and they opened personal bank accounts. The findings show that this process increased the monetary base in Israel but not broader measures of the quantity of money. This suggests that kibbutz members exposed for the first time to paycheques and private bank accounts may initially tend to prefer tangible cash to deposits.