New Study Finds Price Controls Could Save Israeli Households Up to NIS 1.8 Billion Annually
A recent economic analysis by the Arlozorov Forum and the Consumer Protection Authority suggests that implementing selective price controls in Israel could significantly reduce living costs, potentially saving households up to 1.8 billion shekels annually. The study, led by Dr. Yuval Ofek Shani of Bar-Ilan University, argues that Israel's highly concentrated market structure, dominated by a few suppliers with monopolistic power, limits effective competition and keeps prices artificially high. Unlike previous government efforts to lower prices by increasing imports, which have not led to substantial price drops, price controls directly target consumer costs.
Dr. Ofek Shani bases his recommendations on Israel's past experience with price controls on dairy products, showing that removing controls led to sharp price increases, while reinstating them caused notable price reductions. For example, after yogurt and white cheese were deregulated in the late 1990s, their prices rose dramatically compared to controlled products like laban. Reintroducing controls on white cheese in 2014 reduced its price by about 21%. The study estimates that controlling white cheese prices alone has transferred approximately NIS 1.5 billion from producers to consumers over a decade.
The report proposes a methodology for selecting products for price control based on market concentration, consumer expenditure, health considerations, and product uniformity. From an initial list of 58 products, 21 were identified as prime candidates for price regulation, including staple foods like rice, canned corn, butter, yellow cheese, yogurt, and household items such as laundry detergent and diapers. The list also includes household cooking gas, where price disparities exceed 100% across regions, suggesting potential savings of hundreds of millions of shekels annually.
While price controls are often criticized for risks like shortages and quality decline, the study contends these concerns are less relevant in Israel's concentrated market. Instead, well-implemented controls could improve production efficiency and reduce market distortions. The report calls for selective, data-driven application of price controls as part of a broader strategy to combat Israel's persistent cost-of-living crisis, which previous policies focused on import competition have failed to resolve.
Summary: A new study by Israeli economists recommends selective price controls on 21 essential products to combat high living costs, estimating annual household savings of up to NIS 1.8 billion. Drawing on past dairy product controls, the research highlights Israel's concentrated markets and suggests that targeted regulation could be more effective than import-based competition policies.
