IDEAS home Printed from https://ideas.repec.org/p/sip/dpaper/12-024.html
   My bibliography  Save this paper

Gains from Trade: Lessons from the Gaza Blockade 2007-2010

Author

Listed:
  • Assaf Zimring

    (University of Michigan)

Abstract

This paper uses detailed household expenditure and firm production data to study the welfare consequences of the blockade imposed on the Gaza Strip between 2007 and 2010. Using the West Bank as a counterfactual, I find that being removed from world markets reduced welfare by 17%-28% on average. Moreover, households with larger pre-blockade expenditure levels experienced disproportionally larger welfare losses. These effects are substantially larger than the predictions of standard trade models. I show that this large decline in welfare may be due to a combination of resource reallocation and reduced productivity. Using firm level data I find that the blockade triggered reallocation of workers across firms and sectors, especially from manufacturing to services, and from industries that use imported inputs intensively, or export. In addition, labor productivity fell sharply by 23%. This decline was however significantly higher in manufacturing (39%) than in services (5%). These findings suggest that access to world markets did not only determine the location of the Gaza economy on a given Production Possibility Frontier, but also determined the shape of this PPF.

Suggested Citation

  • Assaf Zimring, 2013. "Gains from Trade: Lessons from the Gaza Blockade 2007-2010," Discussion Papers 12-024, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:12-024
    as

    Download full text from publisher

    File URL: http://www-siepr.stanford.edu/repec/sip/12-024.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Feyrer, James, 2021. "Distance, trade, and income — The 1967 to 1975 closing of the Suez canal as a natural experiment," Journal of Development Economics, Elsevier, vol. 153(C).
    2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    3. Douglas A. Irwin, 2005. "The Welfare Cost of Autarky: Evidence from the Jeffersonian Trade Embargo, 1807–09," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 631-645, September.
    4. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
    5. Pinelopi Koujianou Goldberg & Amit Kumar Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(4), pages 1727-1767.
    6. Ossa, Ralph, 2015. "Why trade matters after all," Journal of International Economics, Elsevier, vol. 97(2), pages 266-277.
    7. Petia Topalova & Amit Khandelwal, 2011. "Trade Liberalization and Firm Productivity: The Case of India," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 995-1009, August.
    8. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, September.
    9. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    10. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
    11. Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-283, April.
    12. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    13. Daniel M. Bernhofen & John C. Brown, 2005. "An Empirical Assessment of the Comparative Advantage Gains from Trade: Evidence from Japan," American Economic Review, American Economic Association, vol. 95(1), pages 208-225, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Francesco Amodio & Michele Di Maio, "undated". "Making Do with What You Have: Conflict, Firm Performance and Input Misallocation in Palestine," Development Working Papers 379, Centro Studi Luca d'Agliano, University of Milano.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Etkes, Haggay & Zimring, Assaf, 2015. "When trade stops: Lessons from the Gaza blockade 2007–2010," Journal of International Economics, Elsevier, vol. 95(1), pages 16-27.
    2. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    3. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2018. "Global Firms," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 565-619, June.
    4. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    5. Jan De Loecker & Pinelopi K. Goldberg & Amit K. Khandelwal & Nina Pavcnik, 2016. "Prices, Markups, and Trade Reform," Econometrica, Econometric Society, vol. 84, pages 445-510, March.
    6. Pavcnik, Nina & Goldberg, Pinelopi, 2016. "The Effects of Trade Policy," CEPR Discussion Papers 11104, C.E.P.R. Discussion Papers.
    7. Nicholas Bloom & Paul Romer & Stephen J Terry & John Van Reenen, 2021. "Trapped Factors and China’s Impact on Global Growth [Competition and innovation: an inverted-U relationship]," The Economic Journal, Royal Economic Society, vol. 131(633), pages 156-191.
    8. Imbruno, Michele & Ketterer, Tobias D., 2018. "Energy efficiency gains from importing intermediate inputs: Firm-level evidence from Indonesia," Journal of Development Economics, Elsevier, vol. 135(C), pages 117-141.
    9. Amiti, Mary & Dai, Mi & Feenstra, Robert C. & Romalis, John, 2020. "How did China's WTO entry affect U.S. prices?," Journal of International Economics, Elsevier, vol. 126(C).
    10. Bartelme, Dominick & Lan, Ting & Levchenko, Andrei A., 2024. "Specialization, market access and real income," Journal of International Economics, Elsevier, vol. 150(C).
    11. Olivier Cadot & Céline Carrère & Vanessa Strauss-Kahn, 2013. "Trade Diversification, Income, And Growth: What Do We Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 27(4), pages 790-812, September.
    12. Maria Bas & Vanessa Strauss-Kahn, 2014. "Does importing more inputs raise exports? Firm-level evidence from France," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(2), pages 241-275, May.
    13. Yang Yang, 2018. "Transport Infrastructure, City Productivity Growth and Sectoral Reallocation: Evidence from China," IMF Working Papers 2018/276, International Monetary Fund.
    14. Pablo D. Fajgelbaum & Amit K. Khandelwal, 2016. "Measuring the Unequal Gains from Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(3), pages 1113-1180.
    15. Jose L. Groizard & Priya Ranjan & Antonio Rodriguez‐Lopez, 2015. "Trade Costs And Job Flows: Evidence From Establishment‐Level Data," Economic Inquiry, Western Economic Association International, vol. 53(1), pages 173-204, January.
    16. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2012. "The Empirics of Firm Heterogeneity and International Trade," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 283-313, July.
    17. Gouel, Christophe & Jean, Sébastien, 2023. "Love of variety and gains from trade," European Economic Review, Elsevier, vol. 158(C).
    18. Huang, Hanwei & Manova, Kalina & Perelló, Oscar & Pisch, Frank, 2024. "Firm Heterogeneity and Imperfect Competition in Global Production Networks," CEPR Discussion Papers 19408, C.E.P.R. Discussion Papers.
    19. Ramanarayanan, Ananth, 2020. "Imported inputs and the gains from trade," Journal of International Economics, Elsevier, vol. 122(C).
    20. Jesse Perla & Christopher Tonetti & Michael E. Waugh, 2021. "Equilibrium Technology Diffusion, Trade, and Growth," American Economic Review, American Economic Association, vol. 111(1), pages 73-128, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sip:dpaper:12-024. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anne Shor (email available below). General contact details of provider: https://edirc.repec.org/data/cestaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.