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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. Iddo Kan, Tel: 08-9489233

Secretary: 
Miri Arazi, Tel: 08-9489230

Publications

2016
Shagaida, N. ; Lerman, Z. Land policy in Russia: New challenges; The Eurasian Wheat Belt and Food Security: Global and Regional Aspects; 2016; pp. 33-50. Publisher's VersionAbstract
The chapter examines the outcomes of 20 years of land reform in the Russian Federation’s agriculture. The landownership structure is assessed, the risks voiced at the beginning of the reform are re-evaluated and new risks related to the development of landownership are highlighted. Russia’s land policy has gone through several stages since the beginning of reform: from clearly formulated policies and procedures in the early 1990s to a set of administrative activities entrusted to disjointed land authorities at the present time. Despite institutional difficulties, the land market appears to be emerging in Russia; land has become transferable, it is actively redistributed between peasant farms and corporate farms and it is reallocated to new users. In the absence of an institution that controls and manages the country’s land resources, the land policy is unable to respond to new challenges that arise in the course of the ongoing land reform. © Springer International Publishing Switzerland 2017.
Uzun, V. ; Lerman, Z. Outcomes of agrarian reform in Russia; The Eurasian Wheat Belt and Food Security: Global and Regional Aspects; 2016; pp. 81-101. Publisher's VersionAbstract
In this chapter, we evaluate and analyse the outcomes of agrarian reform in the post-Soviet Russian Federation. The reform has led to a clear change in the agrarian system in Russia, but not all the population, especially not all rural people, have come out as winners. The observed increase in agricultural labour productivity has been accompanied by shedding of labour in agriculture and increasing rural unemployment; the higher productivity of livestock has been accompanied by herd contraction; improved input efficiency has been accompanied by reduction of input use; improved financial stability of agricultural producers has been accompanied by more frequent bankruptcies; and increase of total support to agriculture has been accompanied by reduced efficiency of the support. So far, Russia has not reached the pre-reform production level, and food self-sufficiency is below 90%. A new middle class has not emerged in rural areas: most rural people are the new ‘proletariat’; they earn their livelihoods as hired workers and many of them have lost their land. We observe that agricultural production is increasingly concentrated in large vertically integrated structures with a multiplicity of agricultural subsidiaries and structures that are without analogues in developed economies. The evaluation of Russia’s reform requires a multi-faceted analysis of the entire range of outcomes, accounting for all effects including the adverse impacts. It is only in this way that we can draw valid conclusions from experience and develop recommendations for the future. © Springer International Publishing Switzerland 2017.
Lerman, Z. Privatisation and changing farm structure in the commonwealth of independent states; The Eurasian Wheat Belt and Food Security: Global and Regional Aspects; 2016; pp. 15-32. Publisher's VersionAbstract
The most striking feature of land reform in the post-Soviet space has been the overall shift from collective to individual land tenure in agriculture, generally accompanied by privatisation of legal landownership. Individualisation of farming has been among the main factors that acted to arrest the initial decline in production during the transition and to bring about agricultural recovery in the region. In Commonwealth of Independent States (CIS) countries, the recovery point for agricultural growth is closely linked with the observed watershed dates for individualisation of farming. Furthermore, the rate and the attained level of recovery are higher in countries that pursued decisive individualisation policies (Transcaucasus, Central Asia), while in countries with less sweeping individualisation reforms (European CIS) the recovery has been sluggish. Land reform and individualisation have also led to significant improvements in agricultural productivity due to the higher incentives in family farming. Greater production and higher productivity have contributed to significant poverty reduction since 2000. To ensure continued improvement of rural family incomes and poverty mitigation, policy measures should be implemented that facilitate enlargement of very small family farms and encourage the access of small farms to market channels and services. © Springer International Publishing Switzerland 2017.
Stanchin, I. ; Lerman, Z. Wheat production in Turkmenistan: Reality and expectations; The Eurasian Wheat Belt and Food Security: Global and Regional Aspects; 2016; pp. 215-228. Publisher's VersionAbstract
In the Soviet period, Turkmenistan specialised in cotton production. When the dissolution of the Soviet Union in 1991 led to a breakdown of agricultural trade links between the former Soviet republics, Turkmenistan could no longer rely on assured supplies of wheat in exchange for its cotton, and the food security situation deteriorated. The government launched the Zerno (Grain) Programme in 1991 to resolve emerging difficulties with wheat supply. The measures undertaken between 1991 and 2013 within the framework of this programme included the reorganisation of the government control system for agriculture, the transformation of the farming structure and the implementation of land and water reform. Massive investments amounting to USD 5.5 billion were made in opening up virgin lands for cultivation, developing new infrastructure for grain processing and purchasing new farm machinery. The special attention paid to the grain sector led to the rapid expansion of wheat production. Traditionally a wheat importer, Turkmenistan started exporting wheat in 2010. Projections by local experts suggest that, despite the expected population increase of about 30% over the next 15 years, Turkmenistan will be able to maintain wheat exports at the level of 200,000-400,000 tons annually. © Springer International Publishing Switzerland 2017.
Malkawi, A. I. H. ; Tsur, Y. Reclaiming the Dead Sea: Alternatives for Action. Water Resources Development and Management 2016, 205-225. Publisher's VersionAbstract
The sustainable supply of natural water available in the water basin feeding the Dead Sea (comprising of Israel, Jordan and the Palestinian Authority) will soon drop below 100 cubic metres (m3) per person per year. This has resulted from upstream diversions that over time have deprived the Dead Sea of more than 90 % of its historical inflow and led to a progressive decline of its water level with detrimental effects on the surrounding environment and infrastructure. We examine four alternatives to stabilise or restore the Dead Sea and evaluate the costs associated with each alternative. We also offer a mechanism to pay for the reclamation alternatives based on a surcharge levied on all upstream diversions (including water consumed by the potash industries). The surcharge rates associated with the four alternatives range between zero and USD 0.10 per m3. © The Author(s) 2016.
Tsur, Y. ; Zemel, A. The Management of Fragile Resources: A Long Term Perspective. Environmental and Resource Economics 2016, 65, 639 - 655. Publisher's VersionAbstract
Excessive exploitation diminishes the capacity of natural resources to withstand environmental stress, increasing their vulnerability to extreme conditions that may trigger abrupt changes. The onset of such events depends on the coincidence of random environmental conditions and the resource state (determining its resilience). Examples include species extinction, ecosystem collapse, disease outburst and climate change induced calamities. The policy response to the catastrophic threat is measured in terms of its effect on the long-term behavior of the resource state. To that end, the L-methodology, developed originally to study autonomous systems, is extended to non-autonomous problems involving catastrophic threats.
Tsur, Y. ; Zemel, A. Policy tradeoffs under risk of abrupt climate change. Journal of Economic Behavior & Organization 2016, 132, 46 - 55. Publisher's VersionAbstract
By now it is widely recognized that the more serious threats of climate change are associated with abrupt events capable of inflicting losses on a catastrophic scale. Consequently, the main role of climate policies is to balance between mitigation efforts, aimed at delaying (or even preventing) the occurrence of such events, and adaptation actions, aimed at minimizing the damage inflicted upon occurrence. The former affects the accumulation of greenhouse gases in the atmosphere; the latter determines the impact of loss once the event occurs. This work examines the tradeoffs associated with these two types of policy measures by characterizing the optimal mitigation–adaptation mix in the long run.
Raveh, O. ; Reshef, A. Capital imports composition, complementarities, and the skill premium in developing countries. Journal of Development Economics 2016, 118, 183 - 206. Publisher's VersionAbstract
We study how the composition of capital imports affects relative demand for skill and the skill premium in a sample of developing economies. Capital imports per se do not affect the skill premium; in contrast, their composition does. While imports of R&D-intensive capital equipment raise the skill premium, imports of less innovative equipment lower it. We estimate that R&D-intensive capital is complementary to skilled workers, whereas less innovative capital equipment is complementary to unskilled labor—which explains the composition effect. This mechanism has substantial explanatory power. Variation in tariffs, freight costs and overall barriers to trade, over time and across types of capital, favors imports of skill-complementary capital over other types. We calculate that reductions in barriers to trade increase inequality substantially in developing countries through the composition channel.
Kan, I. Editorial — Special Issue on Economics of Salinity Impacts and Management. Water Economics and Policy 2016, 02, 1602001. Publisher's Version
Baum, Z. ; Palatnik, R. R. ; Kan, I. ; Rapaport-Rom, M. Economic Impacts of Water Scarcity Under Diverse Water Salinities. Water Economics and Policy 2016, 02, 1550013. Publisher's VersionAbstract
Exploitation of alternative water sources is expected to grow in the decades to come in water-stressed countries with fast population growth, especially in regions where a further decline of natural freshwater availability is expected due to climate change. Increasing utilization of non-freshwater usually leads to salinity build-up in fields and water sources as well as accumulation of various pollutants — both having a considerable impact on the suitability of non-freshwater for irrigation due to constraints associated with crop salinity tolerance and food safety regulations. We developed a linked Computable General Equilibrium (CGE) — farm-level model of a water economy with representation for multiple water types characterized by different qualities. We employ the model to assess the impact of water shortage on the Israeli economy, where steadily growing water scarcity leads to an increasing utilization of alternative water sources. We simulate water shortage scenarios based on the Long Term National Master Plan for The Water Economy developed by the Israeli Water Authority (IWA). The linked CGE — farm-level model provides a mechanism for estimating the Constant Elasticity of Substitution (CES) rates between different irrigation water types used in agriculture. This mechanism accounts for the effects of salinity on yields and takes into consideration food safety regulations for irrigating crops with treated wastewater. We demonstrate that, in contrast to previous studies, CES rates between different water types are not identical. The CES rates obtained in our study have relatively low values, which can be attributed to the constraints associated with crop salinity tolerance and food safety regulations. Our results reveal that water shortage can lead to a significant decline of Israel’s GDP, where a considerable part of the decline is attributed to the decrease in agricultural outputs. The magnitude of the impact depends on the underlying assumptions regarding future desalination capacity. To further study the effect of desalination, we run simulations under various desalination levels and examine its impact on the GDP. We also examine the extent to which the impact of water shortage is sensitive to CES rates between different irrigation water types.
Fleischer, A. "QUANTITY AND QUALITY ISSUES IN DEMAND FOR TOURISM.". In Management Science in Hospitality and Tourism: Theory, Practice, and Applications; Management Science in Hospitality and Tourism: Theory, Practice, and Applications; 2016; pp. 125 - 146. Publisher's Version
Ebenstein, A. ; Lavy, V. ; Roth, S. The Long-Run Economic Consequences of High-Stakes Examinations: Evidence from Transitory Variation in Pollution. American Economic Journal: Applied Economics 2016, 8 36-65. Publisher's Version
Reznik, A. ; Feinerman, E. ; Finkelshtain, I. ; Kan, I. ; Fisher, F. ; Huber-Lee, A. ; Joyce, B. The Cost of Covering Costs: A Nationwide Model for Water Pricing. Water Economics and Policy 2016, 02, 1650024. Publisher's VersionAbstract
This study offers a high-resolution model of nationwide water supply. The model is sufficiently detailed to represent all main water sources in an economy, the principal segments of the conveyance system, urban, industrial and agricultural demand regions, and various water types, including fresh, saline and recycled. Calibrated for Israeli 2010 data, we find that the optimal extraction of fresh water is only 2% larger than the total observed supply from those sources. However, for some specific sources, the deviation between optimal and observed quantities is significant. Assuming average constant recharge, the optimal aggregated desalination is 57% of the 2010 desalination capacity and only 33% of the present desalination capacity. Even with an assumed 40% decline in recharge (for example, due to climate change), the model uses only 50% of the present desalination capacity. This may suggest that the construction of desalination facilities in Israel, which began in 2005, could have been delayed. The model establishes a comprehensive system of pumping levies and user fees that support the optimal allocation. However, due to considerable scale economies, the average cost is almost 50% larger than the marginal cost. The implications are that the welfare cost of the recent Israeli Balanced Budget Water Economy legislation is more than 100 million USD per year, about 10% of the water economy share of the GDP.
Ert, E. ; Raz, O. ; Heiman, A. (Poor) seeing is believing: When direct experience impairs product promotion. International Journal of Research in Marketing 2016, 33, 881 - 895. Publisher's VersionAbstract
Marketing tools that enable pre-purchase experience (e.g., product trials, sampling) are considered efficient means of reducing uncertainty and increasing demand for unfamiliar products. It is widely agreed that having more information improves the quality of choice, so demonstrations, sampling, and other experience-generating marketing tools are expected to increase consumers' welfare. The current paper challenges this concept by suggesting that experiencing some product types for a limited time might provide unrepresentative information, and thus might result in suboptimal choices. In three experiments, we evaluated the effect of potentially unrepresentative experience on consumer product acceptance. The results show that while experiencing products affects consumers even when it provides little information, the effect might be positive or negative, depending on the product value distribution. Specifically, short experience with the product increases the appeal of negatively skewed products, which appear appealing after a short, yet unrepresentative experience. Yet short experience impairs the appeal of positively skewed products, which appear unappealing given short or low-intensity experience. This pattern emerges even though the most likely result of a given sample is not a good predictor of the expected utility of the product. Theoretical and practical implications are discussed.
Ert, E. ; Fleischer, A. ; Magen, N. Trust and reputation in the sharing economy: The role of personal photos in Airbnb. Tourism Management 2016, 55, 62-73.
Kimhi, A. ; Sandel, M. Religious Schooling, Secular Schooling, and Household Income Inequality in Israel. In Socioeconomic Inequality in Israel; Socioeconomic Inequality in Israel; 2016; pp. 59-72.
Perez-Sebastian, F. ; Raveh, O. Natural resources, decentralization, and risk sharing: Can resource booms unify nations?. Journal of Development Economics 2016, 121, 38 - 55. Publisher's VersionAbstract
Previous studies imply that a positive regional fiscal shock, such as a resource boom, strengthens the desire for separation. In this paper we present a new and opposite perspective. We construct a model of endogenous fiscal decentralization that builds on two key notions: a trade-off between risk sharing and heterogeneity, and a positive association between resource booms and risk. The model shows that a resource windfall causes the nation to centralize as a mechanism to either share risk and/or prevent local capture, depending on the relative bargaining power of the central and regional governments. We provide cross country empirical evidence for the main hypotheses, finding that resource booms: (i) decrease the level of fiscal decentralization with no U-shaped patterns, (ii) cause the former due to risk sharing incentives primarily when regional governments are relatively strong, and (iii) have no effect on political decentralization.
Ert, E. ; Fleischer, A. Mere Position Effect in Booking Hotels Online. Journal of Travel Research 2016, 55, 311-321. Publisher's VersionAbstract
When travelers book hotels online, they are typically provided with a list of relevant hotels. Although presenting hotels on the screen in a list format seems appropriate for organizing the information, it creates a new (spurious) attribute for them: their position on the list. We tested experimentally whether the hotel’s position on the list affects its likelihood of being selected. Results revealed a nonlinear effect of hotel position on the list on choice: hotels that were listed at the top and bottom of the list were more likely to be chosen than those listed in the middle. This study suggests that even trivial web design choices, such as the choice of presenting data in lists, might result in nontrivial consequences on the behavior of prospective customers.
Ebenstein, A. ; Hazan, M. ; Simhon, A. Changing the Cost of Children and Fertility: Evidence from the Israeli Kibbutz. The Economic Journal 2016, 126, 2038-2063. Publisher's VersionAbstract
Prior to 1996, Israelis in collective communities (kibbutzim) shared the costs of raising children equally. This article examines the impact of privatising costs of children on the fertility behaviour of young couples. Exploiting variation in parental cost-sharing across kibbutzim, we estimate that lifetime fertility declined by 0.65 children. We also examine the exit decisions of members, and find that couples were most likely to leave the kibbutz if they were either higher income or lower fertility. This pattern is also observed among Israeli emigrants, in which higher educated and lower fertility couples are more likely to leave Israel.
2015
Perez-Sebastian, F. ; Raveh, O. The Natural Resource Curse and Fiscal Decentralization. American Journal of Agricultural Economicsajae 2015, 98, 212 - 230. Publisher's VersionAbstract
Natural resource abundance is a blessing for some countries, but a curse for others. We show that differences across countries in the degree of fiscal decentralization can contribute to this divergent outcome. Using a large panel of countries covering several decades and various fiscal decentralization and natural resource measures, we provide empirical support for the novel hypothesis. We also study a model that combines political and market mechanisms under a unified framework to illustrate how natural resource booms may create negative effects in fiscally decentralized nations.