The effect of the Arab boycott on Israel: the automobile market

Recent progress toward 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. 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 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."