Promoting competition to enhance productivity at the firm level and resulting income and growth improvement and a lower cost of living is an important economic and social challenge in Israel. Consistent evidence shows multiple deficiencies leading to a dual functioning of the economy between exposed and sheltered sectors. Product markets are hampered by regulations that are far from best practice. Because of its geographical and geopolitical situation, Israel is less open to foreign trade than other small OECD countries. Moreover, its product markets feature monopolies in many sectors. Addressing these issues have been high on the policy agenda since the 2011 “tent protests”, and the authorities have adopted or launched reforms in many domains since then. However, further increases in foreign trade exposure by lowering non-tariff barriers, making regulation more competition-friendly in network industries, especially electricity, and reducing the oligopolistic structure of the food and banking sectors would still have considerable economic payoffs.This Working Paper relates to the 2016 OECD Economic Review of Israel www.oecd.org/eco/surveys/economic-survey-israel.htm