Project Information

The research carried out in the framework of this project is predicated on the conviction that improved economic perspectives for millions of unemployed and poor Palestinians are an important precondition for reducing the anger and resignation that fuels conflict (World Bank, 2007). The trade and movement restrictions that we propose to analyse are often justified by referring to Israeli security concerns. However, their impact within Palestine heightens economic and social pressures that contribute to security problems (Arnon, 2002). This research is also motivated by the re-emerging recognition of the vital role that agriculture can play in economic development (World Bank, 2008). The importance of agriculture is enhanced in the present context by the fact that it is a land-based activity, and control over and access to land plays a crucial role in the Israeli-Palestinian conflict. Furthermore, with the population of the Near East expected to almost double from currently 195 million to roughly 377 million individuals by 2050 (United Nations, 2007), and as demonstrated by recent unrest for example in Egypt in response to rising food prices, increasing the efficiency of agriculture in the region is a major priority.

The focus of the project are the economic consequences for the agricultural sectors of Israel and Palestine caused by the recent political tensions and the resulting inhibitions to cooperation, production, and trade in the agricultural sector. These political tensions have led to extensive border restrictions between Israel and Palestine and movement restrictions within Palestine (the project will focus on the West Bank only). Hence, although they maintain a customs union vis-à-vis third countries, they are not a free trade area, and cannot realise potential gains from trade in inputs and final products.

The project has three objectives. Its main aim is to foster peaceful cooperation between Israel and Palestine by quantifing potential benefits of removing these restrictions for agriculture and the economy as a whole. For this means, its second objective is to study economic implications of movement and trade restrictions and the potential for increased economic integration. Third, it aims to make methodological contributions in various areas. These objectives will be pursued in four sub-projects which combine to address ten research topics at three geographical levels (within the West Bank, between Israel and the West Bank, and Israel and Palestine vs. the rest of the world).

The project comprises three types of analysis. First, the effects of existing restrictions on the behaviour of prices of major food staples and cash crops, and on welfare are analysed using mainly price transmission analysis. The dynamics and interrelationships of prices are studied both within the West Bank and between the West Bank and Israel. Second, simulation models will be used to study the economic potential of removing restrictions. A partial equilibrium model will generate detailed results for the horticultural sector. Inputs for this model will be provided by an analysis of opportunities for cooperation between Palestinian and Israeli growers and exporters of horticultural products, and by an analysis of willingness to pay for joint Israeli-Palestinian products in the European Union. A regional general equilibrium model of the West Bank and Israel will provide a broader economy-wide perspective of the impact of removing restrictions. It will also be used to simulate changes in the Israeli/Palestinian quasi-customs union vis-à-vis the rest of the world and the integration of Israel's and Palestine's agricultural sectors in the EU market as part of the ongoing Barcelona process. Third, the prospects for agricultural policy changes in Israel and Palestine will be analysed using advanced political economy models to the agricultural sector.

In the tradition of Giersch's (1990) "public economist", we maintain that (agricultural) economists have an obligation to contribute to social and political discourse and the resolution of conflict by increasing transparency. The quantitative welfare analysis of trade and movement restrictions that forms the core of the project is such an exercise in establishing transparency. By putting a price on these restrictions, we can stimulate public debate and motivate stakeholders to reconsider their positions. One sub-project studies the potential for explicit Israeli-Palestinian cooperation in fruit and vegetable production and marketing. Econometric analysis of market structure and pricing in export markets will contribute to evaluate the potential for cooperation in production and exports. Cooperation in marketing through collective branding will be analysed theoretically as well as empirically in a marketing study which studies whether consumers in the EU are willing to pay premium prices for joint Israeli-Palestinian horticultural products. Furthermore, potential benefits of agricultural trade policy options for both Israel and Palestine will be quantifie, and their feasibility from a political economic perspective will be analysed. Options such as improving Palestinian access to world markets or intensifying trade relations with the EU can contribute to economic development, welfare and conflict resolution in the region.


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