The Big Mac Index of “The Economist” published on Friday ranks Israel second in the world, after Switzerland. The index measures the relative price of a McDonald’s Big Mac hamburger in various places around the world. In the previous ranking, published in January, Israel was in eighth place. The index was first published in 1986. The higher the ranking, the more a Big Mac costs in the country in question in relation to other countries.
Two factors lie behind Israel’s sudden jump to second place in the index: a sharp hike in the price of a Big Mac in Israel, and the appreciation of the shekel against the US dollar. In January, the price of a Big Max was NIS 20, and at that time, according to the exchange rate used by “The Economist”, this was equivalent to $6.36. This indicated that the shekel was priced about 4% higher than its fair value against the dollar.
Shortly afterwards, in February, McDonald’s Israel announced a 15% rise in the price of a Big Mac to NIS 23. As a result of that, together with the strong shekel, the cost of a Big Mac hamburger in Israel climbed to $7.40. Israel thus overtook countries that are generally at the top of the index such as Norway, Denmark and Sweden. In January 2025, the price of a Big Mac in Israel was just NIS 17.
The Big Mac Index was dreamt up 40 years ago as a semi-humorous attempt to explain the principle of purchasing power parity. Theoretically, the same product should cost the same in different countries after prices are converted to the same currency. When a Big Mac costs much more in Israel than in the US in dollar terms, this can be an indication that the shekel is overvalued in relation to the dollar, or that local prices are too high.
The Big Mac was chosen as the representative product because it is sold in many countries, is similar in each, and depends on a long list of local goods such as meat, bread, and vegetables, while also incorporating costs such as employee wages, rents, power, transport, advertising, and taxes. “The Economist” states that behind the Big Mac lie more than sixty different ingredients and raw materials, so that, although it is a single product, its price is affected by many parts of the local economy.
Alongside the conversion of Big Mac prices to dollars, “The Economist” also publishes each country’s adjusted GDP, on the assumption that prices in richer countries tend to be higher in any case. Second place in the index does not therefore necessarily mean that Israel is the second most expensive country in the world, but only that the price of a Big Mac in Israel at the shekel exchange rate at the time it was measured was the second highest in the world in dollar terms.
Israel has been there before
This is not the first time that Israel has appeared in the upper reaches of the index. In 1997, Israel was ranked third in the world, after Switzerland and Denmark. The price of a Big Mac was then NIS 11.5, which compared with a theoretical price of NIS 8.18 on the basis of purchasing power versus the dollar. The conclusion was that the shekel was overvalued by 40%. A year later, Israel was still in third place.
Not just the cost of living
“The Economist” points to large gaps between the purchasing power of the US dollar, the Chinese yuan, the Japanese yen, and the euro, and their market exchange rates. It criticizes China over the fact that the weak yuan gives an advantage to its exporters and helps it to accumulate huge trade surpluses, while the US is dealing with large deficits and high imports.
In Israel’s case, the conclusion is complicated. On the one hand, second place in the Big Mac Index accords with the local perception that the cost of living is high, especially food and restaurants. On the other hand, the leap in Israel’s place in the index is largely due to the appreciation of the shekel and the commercial decision to raise the price of the hamburger by 15%.
This also the reason that the index should be regarded as an indicator, but not a verdict. Israel’s second place to a large extent tells the story of the shekel and the price of a hamburger, and not necessarily the whole story of the cost of living.
Published by Globes, Israel business news – en.globes.co.il – on August 2, 2026.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2026.
