The Economic Integration of Agriculture in Israel and Palestine
Final Report Abstract
The primary objective of this research project was to analyze the economic implications of movement and trade restrictions and the potential for economic integration within the West Bank, between Israel and the West Bank and between Israel, Palestine and the rest of the world. Work comprised econometrically analyzing the impact of mobility restrictions for products and labor between Israel and the West Bank on price transmission, price volatility and welfare in the West Bank; analyzing the potential for Israeli‐ Palestinian cooperation in horticultural production and marketing; estimating the costs of movement and trade restrictions, simulating the implications of relaxing these restrictions based on partial and general equilibrium models and analyzing the potential for changes in Israeli and Palestinian agricultural trade policies vis‐à‐vis each other and the rest of the world from a political economy perspective. The second objective of the research was to make methodological contributions in the areas of price transmission analysis, labor market analysis in economy wide models, combining spatial price transmission studies and quantitative simulation models; developing the theoretical foundations for optimally organizing collective brands and applying a novel approach to examine the political viability of agricultural trade reform. The third objective of the research was to foster peaceful cooperation between Israel and Palestine. The project involved the qualification of three postdocs, 8 PhD students and the integration of 15 BSc and MSc theses. The price transmission analysis shows that Israel’s imposition of military security measures in the Palestinian has negative economic effects on all parties concerned. One crucial outcome is the limited ability to carry out trade (movement restrictions are found to temporarily cut off markets from each other), which brings about welfare losses. A 15% reduction in total daily consumption of food in the West Bank is found in times of conflict of high intensity. A pacification of the conflict yields a 20% welfare gain. For fruits, vegetables, meats and dairy products, it appears that market power abuse by processors, wholesalers and retail chains in Israel has adverse effects on the welfare of Israeli and Palestinian consumers and reduces the scope of agricultural trade. Regarding cooperation in marketing, the conditions under which collective branding is favorable are analyzed and this analysis contributes to the exploration of the potential for the establishment of joint Palestinian‐Israeli ’peace brands’. A willingness to pay analysis for Israeli‐Palestinian peace brands was carried in four EU countries (Germany, Italy, the UK and Poland) and found a substantial willingness to pay as well as substantial framing effects. A sectoral and an economy wide simulation model for Israel and the West Bank were developed, as well as a novel approach to depict the mobility of physical labor units while controlling for the movement of productivity. The effect of increased labor mobility from the West Bank to Israel was analyzed under different unemployment settings for the West Bank. The strong disaggregation of household groups allows to distinguish between the direct effects on households with workers eligible to work in Israel, and the indirect effects on households which do not send workers to Israel, but benefit from increased wages in the West Bank. A novel approach was developed to reconcile the results of econometric price transmission analysis with equilibrium modelling by calibrating a CGE model to a given set of econometrically estimated price transmission elasticities. An innovative and comprehensive approach to depict water in economy wide models was developed including alternative water sources such as desalinated water und reclaimed waste water and the substitution possibilities with potable water gained from fresh water resources. A political economy analysis has demonstrated that Israeli dairy companies make use of their market power behind the protection through tariff walls. The liberalization of the Israeli agricultural sector would generate substantial welfare gains. The project shows, that both, Israel and the West Bank, could strongly benefit from economic integration. Furthermore, intensive cooperation and travel between the partners in Palestine, Israel and Germany within this project has strengthened cooperation in its own right. This cooperation went beyond the core research team as we have closely integrated other researchers and students in our work.
Publications
- (2012), Integration of general and partial equilibrium agricultural land‐use transformation for the analysis of climate‐change in the Mediterranean. J. Climate Change Econ. 2(4): 275‐299
Palatnik, R.R., Eboli, F., Ghermandi, A., Kan, I., Rapaport‐Rom, M. and M. Shechter
(See online at https://dx.doi.org/10.1142/S2010007811000310) - (2012): An optimal size for rural tourism villages with agglomeration and congestion effects. European Review of Agricultural Economics, 39 (4): 685–706
Tchetchik A., Fleisher, A. and I. Finkelshtain
(See online at https://doi.org/10.1093/erae/jbr040) - (2013): Consequences of Unintended Food Policies: Food Price Dynamics Subject to the Israeli‐Palestinian Conflict. Food Policy 42: 96–105
Ihle, R. and O.D. Rubin
(See online at https://doi.org/10.1016/j.foodpol.2013.07.007) - (2013): Imperfect Competition, Border Protection and Consumer Boycott: The Future of the Dairy Industry in Israel. Journal of Policy Modeling 35: 838–851
Flaig, D.; Rubin, O. and K. Siddig
(See online at https://doi.org/10.1016/j.jpolmod.2013.01.001) - (2013): Relaxing Israeli Restrictions on Palestinian Labour: Who Benefits? Economic Modeling. 31: 143‐150
Flaig, D., Siddig, K., Grethe, H., Luckmann, J. and S. McDonald
(See online at https://dx.doi.org/10.1016/j.econmod.2012.11.052) - (2014), International Price Transmission in CGE Models: How to Reconcile Econometric Evidence and Endogenous Model Response? Economic Modeling. 38: 12‐22
Siddig, K. and H. Grethe
(See online at https://doi.org/10.1016/j.econmod.2013.11.038) - (2014): An Integrated Economic Model of Multiple Types and Uses of Water. Water Resources Research. 50 (5): 3875–3892
Luckmann, J., Grethe, H., McDonald, S., Orlov, A., and K. Siddig
(See online at https://doi.org/10.1002/2013WR014750) - (2014): No more Gas from Egypt? Modeling Offshore Discoveries and Import Uncertainty of Natural Gas in Israel. Applied Energy. 136, December: 312‐324
Siddig, K. and H. Grethe
(See online at https://doi.org/10.1016/j.apenergy.2014.09.019) - (2015): Two‐Pronged Control of Natural Resources: Prices and Quantities with Lobbying (April 9, 2015). Edmond J. Safra Harvard Working Papers
Finkelshtain, I., Kan, I. and Y. Kislev
(See online at https://dx.doi.org/10.2139/ssrn.2592687) - (2016), Modelling Sectorally Differentiated Water Prices: An Application to the Israeli Water Economy. Water Resources Management. 30 (7): 2327–2342
Luckmann, J., Flaig, D., Grethe, H. and K. Siddig
(See online at https://doi.org/10.1007/s11269-015-1204-7) - (2016), The Natural Gas Sector in Post‐Revolution Egypt. Journal of Policy Modeling. 38 (5): 941–953
Siddig, K. and H. Grethe
(See online at https://doi.org/10.1016/j.jpolmod.2016.03.009) - (2016): Context Effects and the Temporal Stability of Stated Preferences. Social Science Research 60: 135‐147
Liebe, U., Wendler, C., Beyer, H. and S. von Cramon‐Taubadel
(See online at https://doi.org/10.1016/j.ssresearch.2016.04.013) - (2016): Measuring Temporal Dimensions of the Intensity of Violent Political Conflict. Social Indicators Research
Rubin, O.D. and R. Ihle
(See online at https://doi.org/10.1007/s11205-016-1316-3) - (2016): The Cost of Covering Costs: A Nationwide Model for Water Pricing. Water Economics and Policy, 2 (04): 165‐204
Reznik, A., Feinerman, E., Finkelshtain, I., Kan, I., Fisher, F., Huber‐Lee, A. and Joyce, B.
(See online at https://dx.doi.org/10.1142/S2382624X16500247) - (2016): When water saving limits recycling: Modeling economy‐wide linkages of wastewater use. Water Research. 88: 972‐980
Luckmann, J., Grethe, H., and S. McDonald
(See online at https://doi.org/10.1016/j.watres.2015.11.004) - (2017): Economic implications of agricultural reuse of treated wastewater in Israel: A statewide long‐term perspective. Ecological Economics, 135: 222‐233
Reznik, A., Feinerman, E., Finkelshtain, I., Fisher, F., Huber‐Lee, A., Joyce, B. and I. Kan
(See online at https://doi.org/10.1016/j.ecolecon.2017.01.013) - (2018) Collective brands, International Journal of Industrial Organization 59 316-339
Fishman, Arthur; Finkelstein, Israel; Simhon, Avi; Yacouel, Nira
(See online at https://doi.org/10.1016/j.ijindorg.2018.03.002) - (2018): Economic Integration in the Middle East: Israeli‐Palestinian Fresh Food Trade. Israel Affairs
Dobers, G.M., Ihle, R., Kachel, Y. and U. Liebe
(See online at https://doi.org/10.1080/13537121.2018.1455955)
