The paper presents a primary large-scale study of income and job mobility in Israel as derived from the micro-level Income Tax Administration data. The results provide solid evidence that though primary income inequality in Israel in the first half of the 1990s was one of the highest compared with other developed economies, the country's labor market was exceptionally dynamic, due, inter alia, to the succ-essful occupational absorption of new immigrants from the former USSR. The extent of job mobility in Israel closely resembles that of the USA in the late 1980s. Impressive income mobility contributes to high rates of escape from low pay.

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* Research Department, Bank of Israel.