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The Effect of the Arab Boycott on Israel: The Automobile Market


  • Chaim Fershtman

    (Tel Aviv)

  • Neil Gandal

    (Tel Aviv)


Recent progress towards a comprehensive peace in the Middle East has led to a relaxation of the enforcement of the Arab economic boycott of Israel. This in turn has led to the entry of all the major Japanese and Korean automobile manufacturers into the Israeli market. In this paper, we examine the effect of the Arab economic boycott on this market. Using recent advances in estimating discrete-choice models of product differentiation, we estimate that had the boycott continued, the welfare loss per purchaser would have been approximately \$790 in 1994. This benefit can be interpreted as a {\em peace dividend}. Since approximately 113,000 new automobiles were sold in 1994, the welfare gain to consumers was more than \$89 million that year.

Suggested Citation

  • Chaim Fershtman & Neil Gandal, 1995. "The Effect of the Arab Boycott on Israel: The Automobile Market," International Trade 9511001, EconWPA.
  • Handle: RePEc:wpa:wuwpit:9511001
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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. Zijun Luo & Yonghong Zhou, 2016. "Gainers and Losers of Political Instability: Evidence from the Anti-Japanese Demonstration in China," Working Papers 1608, Sam Houston State University, Department of Economics and International Business.
    3. repec:eee:retrec:v:62:y:2017:i:c:p:11-24 is not listed on IDEAS
    4. Amil Petrin, 2001. "Quantifying the Benefits of New Products: The Case of the Minivan," NBER Working Papers 8227, National Bureau of Economic Research, Inc.
    5. Geesche M. Merkle & Rico Ihle & Yael Kachel & Ulf Liebe, 2013. "Economic cooperation despite of political conflict: Israeli traders’ perception of Israeli-Palestinian food trade," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 151, Courant Research Centre PEG.
    6. Eduardo P. S. Fiuza, 2015. "Automobile Demand and Supply in Brazil: Effects of Tax Rebates and Trade Liberalization on Price-marginal Cost Markups in the 1990s," Discussion Papers 0119, Instituto de Pesquisa Econômica Aplicada - IPEA.
    7. Fershtman, C. & Gandal, N. & Markovich, S., 1998. "Estimating the effect of tax reform in differentiated product oligopolistic markets," Discussion Paper 1998-34, Tilburg University, Center for Economic Research.
    8. Jan De Loecker & Johannes Van Biesebroeck, 2016. "Effect of International Competition on Firm Productivity and Market Power," NBER Working Papers 21994, National Bureau of Economic Research, Inc.
    9. Leheyda, Nina, 2008. "Private Incentives to Innovate: Interplay of New Products and Brand-Name Reputation," ZEW Discussion Papers 08-120, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    10. Anindya Ghose, 2005. "Used Good Trade Patterns: A Cross-Country Comparison of Electronic Secondary Markets," Working Papers 05-19, NET Institute, revised Oct 2005.
    11. Hong Canhui & Hu Wei-Min & Prieger James E. & Zhu Dongming, 2011. "French Automobiles and the Chinese Boycotts of 2008: Politics Really Does Affect Commerce," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-38, May.
    12. ME. Canes, 2000. "Country impacts of multilateral oil sanctions," Contemporary Economic Policy, Western Economic Association International, vol. 18(2), pages 135-144, April.

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    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business


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