The effect of advanced industry on the resilience of the economy during war - The Israeli hi-tech industry as a case study

The effect of war on domestic economic indicators has been repeatedly explored in many countries and regarding different eras. The current study focuses on the Israeli economy during the Second Lebanon War, which erupted in 2006, and shows the contribution of Israel’s advanced industry to the resilience of the local economy during that period. This resilience is clearly manifested in the Gross Domestic Product (GDP) indicator, which continued to grow at an increasing rate despite the war and unlike previous wartime eras experienced by Israel.The explanation of the change in the behavior of the GDP during the Second Lebanon War versus its behavior during previous wars is rooted in the striking technological transformation experienced by the Israeli economy from the mid-1990s until the onset of this war. The transformation resulted from the rapid and consistent development of Israel’s advanced industry, with its high recognized contribution to the Israeli economy’s total GDP, both in absolute terms and relative to other industries.The paper presents data attesting to this contribution and portraying its high probability.