Collective Defense by Common Property: the Rise and Fall of the Kibbutz by Liang Diao M.A., Simon Fraser University, 2015 B.Math., University of Waterloo, 2014 Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy in the Department of Economics Faculty of Arts & Social Sciences c Liang Diao 2021 SIMON FRASER UNIVERSITY Summer 2021 Copyright in this work is held by the author. Please ensure that any reproduction or re-use is done in accordance with the relevant national copyright legislation. Declaration of Committee Name: Liang Diao Degree: Doctor of Philosophy Thesis title: Collective Defense by Common Property: the Rise and Fall of the Kibbutz Committee: Chair: Alexander Karaivanov Professor Douglas Allen Senior Supervisor Professor Gregory Dow Supervisor Professor Martin Andresen Internal Examiner Professor School of Criminology Simon Fraser University Dean Lueck External Examiner Professor Department of Agricultural and Resource Economics University of Arizona ii Abstract Common property have long been considered inefficient and short lived, since they encourage high-productivity individuals to leave and shirking among those who stay. In contrast, kibbutzim — voluntary common property settlements in Israel — have lasted almost a century. Recently, about 75% of kibbutzim abandoned their equal-sharing rule and paid differential salaries to members based on their contributions. To explain the long persistence of the kibbutzim, as well as the recent privatization of income, a model of public defense is developed, which attributes equal sharing to the need of inducing high defense in the presence of external threats, and attributes income privatization to the decline of external threats. The insights of the model are supported by the institutional evidence in Chapter 4. In addi- tion to the private income, the kibbutzim also forbade privacy, personal child rearing, and private consumptions. Those measures prevented members from free-riding on the public defense, thereby inducing a strong defense. As a result, the members successfully defended their settlements in civil and military conflicts, thereby consolidating the Jewish territory. In addition to the institutional evidence, the theoretical model yields two predictions: (1) other things equal, a central planner places equal-sharing income communities in dangerous areas, while placing private income communities in safe areas; (2) communities maintain equal-sharing rules in relatively dangerous environments, while privatizing income when the external threats decrease. To test prediction (1), a settlement dataset is constructed to study the location pattern of rural Jewish settlements. The empirical results in Chapter 5 and 6 reveal that the Jewish leadership systematically placed the kibbutzim at peripheral areas to expand the Jewish ter- ritory, and at the frontiers along the attacking routes to delay the offense, thereby protecting the Jewish territory. To test prediction (2), a kibbutz dataset is constructed to study the asymmetric timing of the income privatization. The empirical results in Chapter 7 show that a safer environment in terms of a lower number of nearby conflicts significantly increases the probability for a kibbutz to shift away from equal sharing. The results are robust when using rainfall at the iii nearby refugee camp as an instrument for the conflicts. Keywords: Kibbutz; Collective Defense; Common Property; Property Rights; Transaction Costs iv Dedication To my parents — Yan Diao and Ye Zheng To my partner — Huiqian Song v Acknowledgements I am grateful for many people who have supported me through out the journey toward my PhD degree. I am mostly indebted to my senior supervisor, Douglas Allen, who equips me with tools for solving institutional puzzles, teaches me how to write articles, and guides me through all the ups and downs during the entire journey. I also benefited from Gregory Dow, who encourages me to explore economic history and serves as an inspiration for explaining phenomenon with simple theories. I would like to express my gratitude to faculty members for their advices — Fernando Aragon, Chris Bidner, Shih En Lu, Simon Woodcock and Alex Karaivanov. I gratefully acknowledge the financial support of the Lang Wong Memorial Endowment Scholarship and Research Stipend, and thank all the staff and faculty of the department of economics at Simon Fraser University, especially Gwen Wild and Lisa Agosti. I want to particularly thank Martin Andresen, Yoram Barzel, Olivier Vanden Eynde, James Kung, Dean Lueck, Stelios Michalopoulos, Curtis Milhaupt, Gwendoline Promsopha, Emmanuel Raynaud, Petros Skeris, and seminar participants at IOEA 2019 and SIOE Stockholm 2019 for taking the time and providng feedback for my research work. I am also fortunate to have peers who gives me encouragement — Meiyu Li, Yang Li, Xiaowen Lei, Farouk Abdul-Salam, Zijian Wang, Kevin Laughren. vi Table of Contents Declaration of Committee ii Abstract iii Dedication v Acknowledgements vi Table of Contents vii List of Tablesx List of Figures xii 1 Introduction1 1.1 Ideological Explanations............................. 2 1.2 Collective Defense Explanation......................... 3 1.3 Relevant Literature................................ 5 1.4 Thesis Outline .................................. 6 2 History of Arab-Israeli Conflicts8 2.1 The Jewish Land Policy during the British Mandate............. 8 2.2 Middle-East Wars ................................ 10 2.3 The Rise of the Palestine Liberation Organization .............. 13 2.4 Concluding Remarks............................... 16 3 A Model of Collective Defense 18 3.1 First-Best Solution................................ 19 3.2 Private Income Solution............................. 21 3.3 Equal-Sharing Income Solution......................... 21 3.4 The Choice over Income Arrangements..................... 22 3.5 Central Planner Decision............................. 24 3.6 Concluding Remarks............................... 25 vii 4 Institutional Evidence 26 4.1 Kibbutzim Institutional Confirmations..................... 27 4.2 The Performance of Kibbutzim in Civil Conflicts............... 28 4.3 The Performance of Kibbutzim in Military Conflicts............. 29 4.4 Economic Distortion............................... 30 4.5 Concluding Remarks............................... 31 5 The Jewish Territory Expanded by Kibbutzim 33 5.1 Settlement Data ................................. 34 5.2 Settlements in the Expansion of the Legal Territory ............. 37 5.3 Kibbutzim as Peripheral Settlements...................... 38 5.4 Territory Expansion in the West Bank..................... 42 5.5 Support from the Nearby Jewish Settlements ................. 46 5.6 Concluding Remarks............................... 47 6 The Jewish Territory Defended by Kibbutzim 51 6.1 The Optimal Attacking Routes......................... 52 6.2 The Strategic Locations of Kibbutz....................... 56 6.3 Robust Checks and Placebo Tests........................ 60 6.4 Additional Validation and Alternative Channels................ 63 6.5 Concluding Remarks............................... 65 7 The Income Privatization of Kibbutzim 67 7.1 Kibbutz Transformation............................. 67 7.2 Identification Strategy and Data ........................ 69 7.2.1 Kibbutz Data .............................. 69 7.2.2 Civil Conflicts............................... 72 7.2.3 Refugee Camp and Rainfall Data.................... 73 7.3 OLS Specification and Results.......................... 75 7.4 Instrumental-Variables Strategy......................... 76 7.5 Instrumental-Variables Results ......................... 77 7.6 Concluding Remarks............................... 79 8 Conclusion 82 Bibliography 85 Appendix A Extension to Chapter 2 95 A.1 Israeli Death Tolls Sources............................ 95 Appendix B Extension to Chapter 3 97 viii B.1 The Rarity of Equal-Sharing Communities................... 104 B.2 Illustration of Private Income Arrangement Solution in Doubletown . 106 B.3 Illustration of Equal-sharing Income Arrangement Solution in Doubletown . 108 B.4 Proof of Proposition 3(b) ............................ 110 Appendix C Extension to Chapter 5 111 C.1 Agriculture Potential............................... 111 C.2 Robustness Checks for Peripheral Settlements Before 1937 . 114 C.3 Logit Regressions for Peripheral Settlements Before 1937 . 116 C.4 Robustness Checks for Peripheral Settlements Before 1947 . 118 C.5 Logit Regressions for Peripheral Settlements Before 1947 . 120 C.6 Robust Checks for Settlements in the West Bank . 122 Appendix D Extension to Chapter 6 124 D.1 Constructing Optimal Attacking Routes between Two Points . 124 D.2 Number of Settlements along the Attacking Routes . 128 D.3 Placebo Checks for Kibbutz Locations..................... 130 D.4 Other Robustness Checks ............................ 131 D.5 Actual Attacking Routes and Kibbutz Performance . 133 Appendix E Extension to Chapter 7 137 E.1 Robustness Checks for the First Stage..................... 137 E.2 Robustness Checks for the Main Stage..................... 142 ix List of Tables Table 5.1 Summary statistics for Peripheral Settlements before 1935 . 36 Table 5.2 Summary statistics for Peripheral Settlements before 1947 . 36 Table 5.3 Summary statistics for Peripheral Settlements after 1967 . 37 Table 5.4 Variable Definitions............................ 37 Table 5.5 Peripheral settlements in the 1937 Peel partition plan......... 41 Table 5.6 Peripheral settlements