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

Author

Listed:
  • Chaim Fershtman

    (CCSG, U. of Tel Aviv)

  • Neil Gandal

    (Eco, U. of Texas and Tel Aviv)

Abstract

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.
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Suggested Citation

  • Chaim Fershtman & Neil Gandal, 1996. "The Effect of the Arab Boycott on Israel: The Automobile Market," CARE Working Papers 9607, The University of Texas at Austin, Center for Applied Research in Economics.
    • Handle: RePEc:tex:carewp:9607
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    More about this item

    JEL classification:

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

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