The Palestinian economy and its trade pattern: Stylised facts and alternative modelling strategies

Alberto Botta

MPRA Paper from University Library of Munich, Germany

Abstract: The World Bank (WB) Computational General Equilibrium model (CGE) by Claus Astrup and Sebastian Dessus (2001) is a cornerstone study on Palestine. It adopts a strictly neoclassical perspective, in which price-driven adjustments and the Armington/Constant-Elasticity-of-Transformation (CET) apparatus describe the functioning of the Palestinian economy and its foreign trade relations. This paper argues that certain empirical and factual inconsistencies prevent such a “pure” neoclassical approach from representing the Palestinian reality. We firstly argue that quantity-driven adjustments better describe economic adjustments within the Palestinian economy than price-driven adjustments do. Secondly, we stress the prevailing inter-industry nature of Palestinian foreign trade and the relevance of real income variables to explain expenditure allocation between domestic and imported goods. These aspects are hardly caught by the Armington/CET apparatus and require an alternative formalizing strategy. The final section of the paper describes a heterodox/structuralist perspective on Palestine.

Keywords: Palestine; Foreign trade; Structuralist CGE models (search for similar items in EconPapers)
JEL-codes: B50 C68 F14 (search for similar items in EconPapers)
Date: 2010-10
New Economics Papers: this item is included in nep-ara, nep-hme and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in The Palestinian economy: Theoretical and practical challenges (2010): pp. 194-231

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:29719

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