THE EFFECT OF THE ARAB BOYCOTT ON ISRAEL - THE AUTOMOBILE MARKET

Recent progress toward a comprehensive peace in the Middle East has le d to a relaxation of the enforcement of the Arab economic boycott of I srael. This in turn has led to the entry of all the major Japanese and Korean automobile manufacturers into the Israeli market. We examine t he effect of the Arab economic boycott on this market, Using recent ad vances in estimating discrete-choice models of product differentiation , we estimate that the end of the boycott led to a per-purchaser gain of approximately $2,343 in 1995. This benefit can be interpreted as a ''peace dividend.''