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Consequences of unintended food policies: Food price dynamics subject to the Israeli–Palestinian conflict

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  • Ihle, Rico
  • Rubin, Ofir D.

Abstract

Israel’s imposition of military security measures in the Palestinian territories as a consequence of the long-lasting violent conflict between them has negative economic effects on all parties concerned. One crucial outcome is the limited ability to carry out trade, which brings about welfare losses. Conflict-induced policies such as security measures can result in sizable unintended externalities that shape the markets of and the trade in food. We assess the dynamics of daily wholesale prices of food produced in Israel and the West Bank that is traded between them and is therefore subject to restrictions on movement. To do so, we suggest a regime switching cointegration model which is estimated using a novel extension of the Johansen estimation method. We find that the two major wholesale markets of the two regions are integrated with regard to these main trading products. Deviations from price equilibria are quickly adjusted. The model suggests that movement restrictions temporarily cut off markets from each other. Implications of conflict-induced closures for welfare depend on the direction of trade and are harming both Palestinian and Israeli consumers.

Suggested Citation

  • Ihle, Rico & Rubin, Ofir D., 2013. "Consequences of unintended food policies: Food price dynamics subject to the Israeli–Palestinian conflict," Food Policy, Elsevier, vol. 42(C), pages 96-105.
  • Handle: RePEc:eee:jfpoli:v:42:y:2013:i:c:p:96-105 DOI: 10.1016/j.foodpol.2013.07.007
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    References listed on IDEAS

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    Cited by:

    1. Ihle, Rico & Finkelshtain, Israel & Rubin, Ofir David, 2014. "Markup pricing in the context of a violent conflict: differentiated apples in Hebron wholesale market," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182657, European Association of Agricultural Economists.
    2. repec:spr:soinre:v:132:y:2017:i:2:d:10.1007_s11205-016-1316-3 is not listed on IDEAS
    3. Johanes Agbahey & Khalid Siddig & Harald Grethe, 2016. "Consequences of conflict: the impact of the closure regime on the economy of the West Bank economy," EcoMod2016 9197, EcoMod.

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