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The Department of Environmental Economics and Management

The Robert H. Smith Faculty
of Agriculture, Food and Environment
The Hebrew University of Jerusalem

PO Box 12, Rehovot 76100
Fax: 08-9466267

Department Head:
Prof. Ayal Kimhi, Tel: 08-9489376

Head of the teaching program:
Dr. Ohad Raveh, Tel: 08-9489373

Meital Kappach, Tel: 08-9489230


Heiman, A. ; Just, D. R. Nationalism in the produce aisle: Using country of origin labels to stir patriotism and animosity. Q Open 2021, 1. Publisher's VersionAbstract
This study aims to determine how feelings of nationalism or patriotism for one's own country and feelings of animosity for countries that are in political conflict affect consumers’ willingness to refrain from buying products from various origins. Four hundred forty-two shoppers participated in a survey that included questions about ethnocentric and patriotic feelings and a choice task between local and foreign produce. We find that a significant proportion of Israeli consumers are not willing to buy imported produce from countries that are in conflict with Israel. The proportion of consumers who would not purchase imported produce increases substantially with the intensity of the conflict. Consumers who avoid buying produce from friendly countries are those whose ethnocentric and economic-centric relationship are strong.
Reardon, T. ; Heiman, A. ; Lu, L. ; Nuthalapati, C. S. R. ; Vos, R. ; Zilberman, D. “Pivoting” by food industry firms to cope with COVID-19 in developing regions: E-commerce and “copivoting” delivery intermediaries. Agricultural EconomicsAgricultural EconomicsAgricultural Economics 2021, 52, 459 - 475. Publisher's VersionAbstract
Abstract Coronavirus disease 2019 and related lockdown policies in 2020 shocked food industry firms? supply chains in developing regions. Firms ?pivoted? to e-commerce to reach consumers and e-procurement to reach processors and farmers. ?Delivery intermediaries? copivoted with food firms to help them deliver and procure. This was crucial to the ability of the food firms to pivot. The pandemic was a ?crucible? that induced this set of fast-tracking innovations, accelerating the diffusion of e-commerce and delivery intermediaries, and enabling food industry firms to redesign, at least temporarily, and perhaps for the long term, their supply chains to be more resilient, and to weather the pandemic, supply consumers, and contribute to food security. We present a theoretical model to explain these firm strategies, and then apply the framework to classify firms? practical strategies. We focus on cases in Asia and Latin America. Enabling policy and infrastructural conditions allowed firms to pivot and copivot fluidly.
Biyalogorsky, E. ; Heiman, A. ; Muller, E. The differential effects of time and usage on the brand premiums of automobiles. 2021. Publisher's VersionAbstract
We investigate how the status and functional benefits of cars’ brands lose value over time. Theoretically, we show that brands with a higher status, or that appeal to status-conscious consumers, exhibit steeper price decline over time. Empirically, we take advantage of the phenomenon of twin cars – pairs of car models that are nearly identical from a structural and mechanical standpoint, but that are sold under differing brand names – to disentangle the effects of physical wear and tear, which should impact both the premium brand and the corresponding standard brand similarly; and time-related price decline, which should affect each brand differently. The main result is that a premium car’s price declines much faster than that of the corresponding standard car (controlling for physical condition, mileage, and initial price). This result suggests that status declines faster than do functional attributes, and status seekers tend to replace their cars earlier.
Fleischer, A. ; Ert, E. ; Bar-Nahum, Z. The Role of Trust Indicators in a Digital Platform: A Differentiated Goods Approach in an Airbnb Market. Journal of Travel Research 2021, 00472875211021660. Publisher's VersionAbstract
We employed a differentiated goods market analysis where we utilized, in addition to the prevailing goods’ attributes, different types of the sellers’ attributes including trust indicators. We incorporated both sets of attributes into a structural model of the whole market including demand and pricing equations with the hotels as an outside good. Applying the model to Stockholm’s Airbnb market reveals that hosts’ attributes significantly affect market performance. Simulations of market scenarios show that the very high review scores and the Superhost certification help Airbnb compete with hotels and increase profitability. We also show that the “Airbnb plus” luxury program, which makes the apartments a closer substitute for hotels, leads to an increase in Airbnb’s market welfare. Our analysis provides a framework for understanding the full impact of the different attributes of the products, their providers, and their management in the sharing-economy accommodation market.
Dinar, A. ; Tsur, Y. The Economics of Water Resources: A Comprehensive Approach; Cambridge University Press: Cambridge, 2021. Publisher's VersionAbstract
Population growth and rising living standards, on the one hand, and changing climate, on the other hand, have exacerbated water scarcity worldwide. To address this problem, policymakers need to take a wide view of the water economy – a complex structure involving environmental, social, economic, legal, and institutional aspects. A coherent water policy must look at the water economy as a whole and apply a comprehensive approach to policy interventions. Written by two of the world's leading scholars on economics of water, this is the first graduate-level textbook on the topic. The book discusses water resource management within a comprehensive framework that integrates the different, yet highly entwined, elements of a water economy. It follows the steps needed to develop a well-designed set of policies based on detailed analyses of intervention measures, using multi-sectoral and economy-wide examples from a variety of locations and situations around the world.
Fan, J. ; Zhou, L. ; Zhang, Y. ; Shao, S. ; Ma, M. How does population aging affect household carbon emissions? Evidence from Chinese urban and rural areas. Energy Economics 2021, 100, 105356. Publisher's VersionAbstract
Population aging has become a salient demographic phenomenon in China, thus causing social and economic concerns. However, little is known about the impact of population aging on the environment. The available literature mainly emphasizes decreases in energy consumption or carbon emissions caused by population aging, conveying limited information about the impact of population aging on household carbon emissions. This paper explores the impact of population aging on household carbon emissions in both urban and rural areas of China, using panel data of 30 provinces over 1997–2017. The relationship between population aging and household carbon emissions is investigated with a threshold regression model and a two-stage instrumental variable regression model. The results show that urban population aging increases urban household carbon emissions at levels both below and above 0.083, while this positive impact is comparatively smaller when urban population aging is above 0.083. However, at the national level, rural population aging has no significant impact on rural household carbon emissions at the level below 0.066, while rural population aging significantly increases rural household carbon emissions at the level above 0.066. Rural population aging has a significant positive effect on the increase in household carbon emissions in northern heating areas, when rural population aging is both below and above 0.077. The analysis of the underlying mechanism identifies consumption structure and consumption level as intermediary factors that affect the nonlinear relationship between urban population aging and urban household carbon emissions. Furthermore, the income level also affects the nonlinear relationship between rural population aging and rural household carbon emissions.
Hatan, S. ; Fleischer, A. ; Tchetchik, A. Economic valuation of cultural ecosystem services: The case of landscape aesthetics in the agritourism market. 2021, 184, 107005. Publisher's VersionAbstract
Natural and agricultural landscapes provide a wide range of ecosystem services, among which are aesthetic landscapes. As these services have no direct market value, land use decision makers often ignore them in favor of urban sprawl, resulting in suboptimal resource allocation. Here, we suggest a novel method to evaluate the aesthetic landscape services of natural and agricultural ecosystems using the case of the agritourism market in Israel. We model the agritourism market as an oligopolistic market with differentiated products and formulate an equilibrium model with structural, double nested logit demand and pricing equations. The structural equations are expressed as a function of the attributes of the agritourism firm, among which are the components of landscape view. We use aggregate market data and GIS data to estimate the structural model. In the case of urban sprawl, the welfare loss is estimated at US$29,000–53,000 per km2, depending on the type of ecosystem that is forgone, whereas in agricultural sprawl over natural areas, the welfare loss is estimated at US$38,000 per km2. This welfare loss can be considered the economic value of landscape aesthetics services to the agritourism market. These findings illustrate the potential of using this valuation method for other ecosystems in other markets.
Perez-Sebastian, F. ; Raveh, O. ; van der Ploeg, F. Oil discoveries and protectionism: Role of news effects. Journal of Environmental Economics and Management 2021, 107, 102425. Publisher's VersionAbstract
Can oil discovery shocks affect the demand for protectionism? An intertemporal model of Dutch disease indicates that if the tradable sector is politically dominant then an oil discovery can induce protectionism. If the economy is also credit constrained, this effect is intensified upon discovery, but partially reversed when oil revenues start to flow. We test these predictions using 16.2 million, HS-6 level, bilateral tariff rates that cover 5718 products in 155 countries over the period 1988–2012, and data on worldwide discoveries of giant oil and gas fields. Our identification strategy rests on the exogeneity of the timing of discoveries. Our empirical results indicate that an oil discovery increases tariffs during pre-production years and decreases tariffs in the years to follow yet to a lesser extent, most notably in capital scarce economies with a relatively dominant tradable sector. Our baseline estimates indicate that a giant oil field discovery induces a rise of approximately 13% in the average tariff over the course of 10 years; this increase is approximately 2.5 times larger during the pre-production period when the oil discovery represents a pure news shock.
Slater, Y. ; Finkelshtain, I. ; Reznik, A. ; Kan, I. Large-Scale Desalination and the External Impact on Irrigation-Water Salinity: Economic Analysis for the Case of Israel. Water Resources Research 2020, 56, e2019WR025657. Publisher's VersionAbstract
Abstract Recent agroeconomic studies in water-scarce countries such as Spain, Australia, Saudi Arabia, and Israel have revealed the economic viability of irrigating high-value crops with desalinated water. However, the worldwide growth of large-scale desalination capacities is primarily designed to resolve urban-water scarcity, disregarding the impact of desalination on irrigation-water salinity. We develop a dynamic hydroeconomic programming model where infrastructure capacities and allocations of water quantities and salinities in a regional water distribution network are endogenous. We show that subsidizing desalination is socially warranted because the associated reduction in irrigation-water salinity is an external effect of water consumption by all water users. Empirical application to the entire state of Israel indicates that large-scale desalination of seawater and treated wastewater for irrigation is optimal. This result stems from the large share of irrigation-intensive salinity-sensitive high-value crops, motivated by Israel's policies to support local agriculture. Ignoring salinity results in a 45% reduction in desalinated irrigation water, a 29% reduction in farming profits, a 250% increase in water suppliers' profits, and an average deadweight loss of \$1,200 a year per hectare of arable land.
Finkelshtain, I. ; Kan, I. ; Rapaport-Rom, M. Substitutability of Freshwater and Non-Freshwater Sources in Irrigation: an Econometric Analysis. American Journal of Agricultural Economics 2020, 102, 1105-1134. Publisher's VersionAbstract
Population growth is increasing the scarcity of freshwater for irrigation and accelerating its replacement with non-freshwater sources such as treated wastewater and brackish water. Although these substitutes may be less productive agronomically, their supply is usually more stable. We develop a structural econometric framework to assess the substitution between fresh- and non-fresh water as it is inferred from water-use decisions of farmers under increasing block-rate water pricing. We employ the model to village-level panel data from Israel, in which 50% of the freshwater allotments were replaced during the 1990–2010 period by treated-wastewater quotas, using a non-freshwater/freshwater volumetric exchange rate of 1.2. Based on our estimation results, the hypothesis that the marginal rate of substitution between the two water sources is equal to one cannot be rejected. Simulations suggest that the Israeli quota-exchange policy has increased both agricultural production value and farming profits.
Raveh, O. ; Tsur, Y. Reelection, growth and public debt. 2020, 63, 101889. Publisher's VersionAbstract
In this work we examine how economic growth affects public debt when interacted with reelection prospects. Reelection considerations shorten political time horizons and give rise to political myopia that exacerbates debt accumulation. That laxer institutional reelection restrictions (e.g., no term limits) mitigate this effect due to electoral accountability is well known. Incorporating growth, we find that this mitigation can be reversed because less myopic, and more accountable, incumbents put more emphasis on smoothing the effects of growth across generations. We test these predictions using an annual-based panel of U.S. states over the period 1963–2010. Our identification strategy rests on constitutionally-entrenched differences in gubernatorial term limits that provide plausibly exogenous variation in reelection prospects, and aggregate national TFP shocks that are exogenous to individual states. Our estimates indicate that when reelection is possible a one standard deviation positive income shock induces, within the same year, a relative increase of approximately $40 in real per capita public debt.
Bar-Nahum, Z. ; Finkelshtain, I. ; Ihle, R. ; Rubin, O. D. Effects of violent political conflict on the supply, demand and fragmentation of fresh food markets. 2020, 12, 503 - 515. Publisher's VersionAbstract
Violent political conflict has been documented to have comprehensive adverse effects on economic activity and, thus, substantially harm social welfare. As conflict escalations are often reported to fragment economic space, we suggest an empirical framework which allows for estimating changes in the size of markets often split by frontlines. This approach uses a differentiated goods oligopoly model to separate effects of conflict intensity on consumer demand, costs of trade, market size, and market structure. We combine daily sales of apples in Hebron - one of the focal points of the Israeli–Palestinian conflict - and variables quantifying complementary aspects of conflict intensity. Conflict is found to suppress demand and affect competition more significantly than it increases costs of trading. Simulations indicate a 15% reduction in total daily consumption during conflict of high intensity while a pacification would yield a 20% welfare gain. This empirical framework allows disentangling the effects of conflict on food markets. The results suggest that relief policies should consider alleviating effects of fragmentation of economic space, e.g., by ensuring humanitarian corridors.
Heiman, A. ; Ferguson, J. ; Zilberman, D. Marketing and Technology Adoption and Diffusion. Applied Economic Perspectives and Policy 2020, 42, 21-30. Publisher's VersionAbstract
Abstract Applied economists have investigated individual adoption choices as well as diffusion (aggregate adoption). The emphasis, however, has been on adopters' behavior and risk associated with production and markets. Marketing also considers broader aspects and marketers develop tools to address risk related to the fit of a product, its performance, and its reliability. This paper expands the economic literature on adoption by analyzing and assessing the implications of the choice of marketing tools, like money-back guarantees, demonstrations, and others, by marketers. The analysis is based on the threshold model of diffusion, which recognizes heterogeneity and dynamics. We provide evidence and examples from agriculture.
Tsur, Y. Optimal water pricing: Accounting for environmental externalities. Ecological Economics 2020, 170, 106429. Publisher's VersionAbstract
A pricing-based mechanism that implements the optimal water policy while accounting for environmental externalities is developed. The analysis is presented in the context of a comprehensive water economy, stressing the tradeoffs between water use in the provision of ecosystem services vs. other uses. A distinction is made between conveyed and instream environmental water, which turns out to have important policy implications. It is shown that the allocation of instream water can be implemented by properly incorporating the (marginal) instream value of water within the shadow (in situ) price of natural water. The regulation of conveyed environmental water requires a quota-price combination. An example based on Israel's water economy is presented.
Gould, E. D. ; Simhon, A. ; Weinberg, B. A. Does Parental Quality Matter? Evidence on the Transmission of Human Capital Using Variation in Parental Influence from Death, Divorce, and Family Size. Journal of Labor Economics 2020, 38, 569–610. Publisher's VersionAbstract
This paper examines the transmission of human capital from parents to children using variation in parental influence due to parental death, divorce, and the increasing specialization of parental roles in larger families. All three sources of variation yield strikingly similar patterns that show that the strong parent-child correlation in human capital is largely causal. In each case, the parent-child correlation in education is stronger with the parent who spends more time with the child and weaker with the parent who spends relatively less time parenting. These findings help us understand why educated parents spend more time with their children.
Raveh, O. Monetary Policy, Natural Resources, and Federal Redistribution. Environmental and Resource Economics 2020, 75, 585-613. Publisher's VersionAbstract
Can monetary policy shocks induce redistribution across natural resource rich and poor states within a federation? We conjecture that resource-rich states are capital intensive, hence their investment is more responsive to changes in monetary policy. Consequently, contractionary monetary policy shocks (e.g., increases in the interest rate) may induce redistribution from resource-poor states to resource-rich ones, via an equalizing federal transfer scheme, because investment is reduced more strongly in the latter. We test these hypotheses using a panel of U.S. states covering several decades, and find that: (1) resource-rich states are significantly and persistently more capital intensive; (2) contractionary monetary policy shocks induce a relative drop (increase) in investment (federal transfers) in resource-rich states, over the course of four years; (3) these patterns are driven by resource-induced differences in the capital share in the economy. We estimate that a one standard deviation contractionary monetary shock induces, within the first year, federal redistribution of approximately $$\$2.5$$$2.5 billion from the resource-poor to the resource-rich states, representing about $$11\%$$11% of the total average annual federal transfers received by the latter states.
Raveh, O. ; Tsur, Y. Resource windfalls and public debt: A political economy perspective  . European Economic Review 2020, 123, 103371. Publisher's VersionAbstract
Can natural resource windfalls increase public debt in democracies? Adopting a political economy perspective, we show that the answer is in the affirmative. Resource windfalls increase both the government’s income and wealth. The former mitigates the need to borrow, whereas the latter encourages further borrowing (as it improves its terms), implying an ambiguous pure effect of resource windfalls on debt. Re-election considerations shorten political time horizons and give rise to political myopia. We show that higher political myopia, induced by more stringent (institutional) re-election restrictions, magnifies the wealth effect, turning positive the effect of resource windfalls on debt. We test the model’s predictions using a panel of U.S. states over the period 1963-2007. Our identification strategy rests on constitutionally-entrenched differences in gubernatorial term limits that provide plausibly exogenous variation in re-election prospects, and geographically-based cross-state differences in natural endowments. Our baseline estimates indicate that a resource windfall of $1 induces an increase of approximately ¢20 in the public debt of states with more stringent re-election restrictions.
Ert, E. ; Fleischer, A. What do Airbnb hosts reveal by posting photographs online and how does it affect their perceived trustworthiness?. Psychology & Marketing 2020. Publisher's VersionAbstract
Abstract The use of sellers' personal photographs online is ubiquitous in sharing economy platforms such as Airbnb. This paper addresses two questions. First, what type of personal photos do hosts choose to post on Airbnb? Second, which of the characteristics of their photos affects their perceived trustworthiness? We answer these questions by building a structural equation model of the relation between the characteristics of the photos and the perceived trustworthiness of the hosts. The antecedents of trust in this model were defined based on insights from psychology regarding first impressions. We found that the hosts' visual characteristics (e.g., gender) as revealed in their online photographs affect their perceived trustworthiness both directly and indirectly via attractiveness. We also found that image characteristics, which are not related directly to the traits of the host in the picture (e.g., photograph quality), play a significant role in trust inference. Interestingly, the hosts' choices of their personal photos suggest that they may not be aware of these effects.
Shirley Hershko, ; Cortese, S. ; Ert, E. ; Anna Aronis, ; Adina Maeir, ; Yehuda Pollak,. Advertising Influences Food Choices of University Students With ADHD. Journal of Attention Disorders 2019, online first. Publisher's VersionAbstract
Objective: Previous research in adults with ADHD showed high rates of obesity and unhealthy food choices. There is evidence that contextual cues, for example, advertisements, influence food choices. This study assessed the sensitivity of university students with ADHD to advertised food. Method: University students (N = 457) with and without ADHD participated in a cafeteria field experiment. Food choices were examined in periods of advertising either healthy or unhealthy sandwiches. Results: Students with ADHD (a) chose less healthy food items, (b) were more influenced by advertising, (c) showed the same overall healthy food choices as controls when exposed to healthy advertising. Conclusion: Students with ADHD chose unhealthier foods at the cafeteria but were also more influenced by advertising. Healthy food advertisements raised their healthy food choices. As this population has strong association with unhealthy dietary patterns, it is important to investigate the influence of food cues on their eating habits.
Kagansky, N. ; Knobler, H. ; Stein-Babich, M. ; Voet, H. ; Shalit, A. ; Lindert, J. ; Knobler, H. Y. Holocaust survival and the long-term risk of cardiovascular disease in the elderly. Israel Medical Association Journal 2019, 21, 241-245. Publisher's VersionAbstract
Background: Reports of longevity in Holocaust survivors (HS) conflict with excess prevalence of chronic diseases described among them. However, data on their long-term risk of cardiovascular diseases (CVD) are limited. Clinical data on large representative groups of HS who were exposed to severe persecution are also limited. Objectives: To determine the prevalence of CVD and the risk factors in a large cohort of elderly HS compared to elderly individuals who were not exposed to the Holocaust (NHS). Methods: CVD prevalence rates and data on risk factors from the computerized system of the central district of Clalit Health Services, the largest Israeli health maintenance organization in Israel, were evaluated in a retrospective observational study. The study was comprised of 4004 elderly HS who underwent direct severe persecution. They were randomly matched by identification numbers to 4004 elderly NHS. Results: HS were older than NHS and 51% of them were older than 85 years. The prevalence rate of ischemic heart disease (IHD) was significantly higher among HS. HS underwent significantly more cardiac interventions (20% vs. 15.7%, P < 0.05). HS status was an independent risk factor for increased IHD and for more coronary interventions. Conclusions: Despite having a higher prevalence of CVD, a substantial number of HS live long lives. This finding may imply both unique resilience and ability to cope with chronic illness of the survivors as well as adjusted medical services for this population. These findings may help in planning the treatment of other mass trauma survivors. © 2019, Israel Medical Association. All rights reserved.