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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

Prof. Ayal Kimhi, Tel: 08-9489376

Prof.Iddo Kan, Tel: 08-9489233

Secretary:
Miri Arazi, Tel: 08-9489230

# Publications

2021
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.
2020
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.
2019
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.
Yanbykh, R. ; Saraikin, V. ; Lerman, Z. Cooperative tradition in Russia: a revival of agricultural service cooperatives?. Post-Communist Economies 2019, 31, 750-771. Publisher's VersionAbstract
Agricultural cooperatives in Russia have had an uneven evolution: from their initial form of service cooperatives based on classical principles of cooperation in the decades before 1929, they evolved to predominantly production cooperatives during the Soviet era and then back to service cooperatives with the rapid decline in the number and share of production cooperatives after 1992. The number of agricultural cooperatives providing product marketing, input supply, machinery and farm credit services matches the number of production cooperatives as of 2016 but formal membership in service cooperatives is minuscule. Yet, the potential membership in agricultural service cooperatives is conservatively estimated at between 3.8 and 7.5 million rural households, or between 29% and 56% of the rural households in 2017. These numbers represent the pool of small agricultural producers in Russia that are most likely to benefit from cooperation in farm services. More optimistic estimates put the potential number of cooperators at over 90% of all rural households. Examination of possible policy measures for the development of service cooperatives has led to a disturbing conclusion that cooperatives flourish in regions that provide ample budgetary support. No tendencies for significant bottom-up development of cooperatives are observed. © 2019, © 2019 Informa UK Limited, trading as Taylor & Francis Group.
Uzun, V. ; Shagaida, N. ; Lerman, Z. Russian agriculture: Growth and institutional challenges. Land Use Policy 2019, 83, 475-487. Publisher's VersionAbstract
Russian agriculture has shown stable growth since 1999. The food trade balance steadily improves and the share of imported food in retail markets is decreasing due to the government's import substitution policies. Russia has re-emerged on the world arena as a food exporter and now ranks among the leading exporters of wheat and vegetable oil. Agricultural production growth has become export oriented. To continue its growth, Russia's agriculture should emphasize returning unused land to cultivation and adopt new technologies to increase the comparatively low crop and livestock yields. The skewed land distribution and agricultural support system, both strongly biased toward large farms and agroholdings, constrain the development of small farms and prevent their participation in food value chains, negatively impacting on rural development. © 2019 Elsevier Ltd
Heiman, A. ; Gordon, B. ; Zilberman, D. Food beliefs and food supply chains: The impact of religion and religiosity in Israel. Food Policy 2019, 83, 363 - 369. Publisher's VersionAbstract
This paper demonstrates that religion and religiosity affect norms, which affect food consumption patterns and production. Heterogeneity and asymmetric information lead to multiple certification channels as well as multiple supply chains. Major supply chains may address multiple constituencies that are secular or less religious. Technological change affects norms and thus the food system. We obtain these results by analyzing the food systems for meat products in Israel where there are three religions – Jews, Muslims, and Christians – and people assign themselves three levels of religiosity – secular, conservative, and orthodox. Israel has multiple Kosher and Halal certifiers and several specialized supermarket chains for orthodox groups. Its main supermarket chains serve secular and some conservative segments. The immigration of secular Jews from Russia led to the proliferation of non-Kosher supply chains and products, and increased consumption of pork. New technologies and higher incomes led to emergence of fast food chains serving orthodox Jews that had previously tended to eat at home.
Elimelech, E. ; Ert, E. ; Ayalon, O. Bridging the gap between self-assessments and measured household food waste: A hybrid valuation approach. Waste Management 2019, 95, 259 - 270. Publisher's VersionAbstract
Great effort is invested in mapping the extent of household food waste and its main determinants. However, food waste valuation remains a challenging task. Valuation methods can be divided roughly into objective measurements that are based on physical waste surveys, and subjective self-assessments that are based on diaries or questionnaires. Self-assessment methods have been more popular than food waste measurement because they are less costly. The goal of this paper is to empirically test whether self-assessments can accurately reflect objective measurement. To answer this question, we implemented a hybrid valuation approach by integrating and comparing three methods: a self-assessment questionnaire, a physical waste survey, and a food expenditure survey. Self-assessments slightly underestimated measured food waste proportion (13.7% vs. 16.3%, respectively). The results also show a positive, yet, not very strong correlation between the measures and the self-assessments of unconsumed and partly consumed avoidable food waste in most food categories. Self-assessments of monetary losses were €42.07 per household per month on average, overestimating calculated losses of €25.74 on average. Our findings question the validity of self-assessments. The current paper demonstrates the questionable nature of the implicit assumption that self-assessment reflects the true level of food waste and suggests a rigorous method for exploring this relation.
Elimelech, E. ; Ert, E. ; Ayalon, O. Exploring the Drivers behind Self-Reported and Measured Food Wastage. Sustainability 2019, 11. Publisher's VersionAbstract
Understanding households’ food waste drivers is crucial for forming a coherent policy to meet the sustainable development goals. However, current studies have documented mixed evidence regarding food waste determinants. Most studies have relied on self-reports, assuming they reflect actual behaviors. This study applies a structural equation model that evaluates both self-reported and measured food wastage, and how they are affected by different households’ attributes, attitudes, and behaviors. As such, it also provides a test for the underlying logic that self-reports are a proxy for actual food waste. Results show that measured food wastage is, at best, weakly correlated with self-reports. Moreover, drivers affecting self-reported and measured food wastage are not necessarily the same. Household size affects only measured food wastage. Source separation behavior negatively affects self-reported and measured food wastage, while environmental attitudes have a negative effect only on self-reports. Meal planning, unplanned shopping, and food purchased have no impact on self-reported and measured food wastage. The relation between self-reported and actual food waste and their drivers are even less understood than we thought. The distinction between self-reports and actual waste is crucial for follow-up research on this subject as well as assessing policy measures.
Perez-Sebastian, F. ; Raveh, O. Federal tax policies, congressional voting and natural resources. Canadian Journal of Economic 2019, 52, 1112-1164. Publisher's VersionAbstract
Abstract Can abundance of natural resources affect legislators' voting behaviour over federal tax policies? We construct a political economy model of a federalized economy with district heterogeneity in natural resource abundance. The model shows that representatives of natural resource-rich districts are more (less) willing to vote in favour of federal tax increases (decreases). This occurs because resource-rich districts are less responsive to federal tax changes due to the immobile nature of their natural resources. We test the model's predictions using data on roll-call votes in the US House of Representatives over the major federal tax bills initiated during the period of 1945–2003, in conjunction with the presence of active giant oil fields in US congressional districts. Our identification strategy rests on plausibly exogenous giant oil field discoveries and exploitation and narrative-based aggregate federal tax shocks that are exogenous to individual congressional districts and legislators. We find that: (i) resource-rich congressional districts are less responsive to changes in federal taxes and (ii) representatives of resource-rich congressional districts are more (less) supportive of federal tax increases (decreases), controlling for legislator, congressional district and state indicators. Our results indicate that resource richness is approximately half as dominant as the main determinant, namely party affiliation, in driving legislators' voting behaviour over federal tax policies.