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

23 Pages Posted: 17 Jan 1997

See all articles by Neil Gandal

Neil Gandal

Berglas School of Economics, Tel Aviv University; Centre for Economic Policy Research (CEPR)

Date Written: January 1996

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 $1940 in 1995. This benefit can be interpreted as a peace dividend. Since approximately 113,000 new automobiles were sold in 1995, the welfare gain to consumers was more than $219 million that year.

JEL Classification: F14

Suggested Citation

Gandal, Neil, The Effect of the Arab Boycott on Israel: The Automobile Market (January 1996). Available at SSRN: https://ssrn.com/abstract=1488 or http://dx.doi.org/10.2139/ssrn.1488

Neil Gandal (Contact Author)

Berglas School of Economics, Tel Aviv University ( email )

Tel Aviv University
Tel Aviv 69978
Israel
+972 3 640 9907 (Phone)
+972 3 640 9908 (Fax)

HOME PAGE: http://www.neilgandal.com/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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