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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

Herzl 229, Rehovot 7610001
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


Bar-Nahum, Z. ; Reznik, A. ; Finkelshtain, I. ; Kan, I. Centralized water management under lobbying: Economic analysis of desalination in Israel. Ecological Economics 2022, 193, 107320. Publisher's VersionAbstract
This paper studies the impact of lobbying on policies in a centrally managed water economy. First, we develop an optimal control model in which long-run water-management policies are an outcome of negotiation between policymakers and a politically organized farming sector. We show that under equilibrium conditions in the political game, larger political power of the farmers' lobby leads to faster exhaustion of naturally replenished water resources, and expedites the investment in water-supply backstop technologies such as desalination. Then, we employ a detailed hydro-economic model of Israel's water economy to assess the validity of claims by scientists and bureaucrats that lobbying by the local agricultural sector has contributed to the depletion of the country's natural freshwater resources and thus accelerated the development of seawater desalination. Specifically, we compare observed trajectories of water-management policies in the years 2000–2020 to their simulated counterparts, and find a better fit for simulated scenarios that involve lobbying than for a socially optimal one; this result prevails under simulated conditions of extreme water shortage due to faster population growth or lower recharge of natural water sources. The best-fitted political-equilibrium scenarios indicate considerable deadweight loss. We discuss potential causes of over- and undervaluation of the lobbying effect.
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.
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.
Talev, E. ; Bar-Nahum, Z. ; Fleischer, A. ; Tchetchik, A. Is agriculture important to agritourism? The agritourism attraction market in Israel. European Review of Agricultural Economicserae 2018, 45, 273 - 296. Publisher's VersionAbstract
Agritourism attractions are a commonly chosen alternative in farm diversification. Some attractions are based on active farms, while others are based on rural ambience. We model and estimate the agritourism attraction market as a differentiated-goods market based on Israeli market data and simulate different scenarios. We show that total welfare increases when attractions are based on rural ambience rather than on active farms. We also show that an indirect support scheme has a stronger impact on total welfare than a direct scheme.