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Testing the Heckscher–Ohlin–Vanek theory with a natural experiment

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  • Assaf Zimring

Abstract

I use the historical episode of near‐elimination of commuting from the West Bank into Israel to test three key predictions of the Heckscher–Ohlin–Vanek model of trade and find strong support for them. On the production side, I use variation between districts and find that wage changes were not correlated with the size of the shock to the labour force (factor price insensitivity) and that districts that received larger influx of returning commuters shifted production more towards labour‐intensive industries (Rybczynski effect). On the consumption side, data are consistent with identical homothetic preferences, which, combined with the production results, supports the Heckscher–Ohlin–Vanek theorem on the factor content of trade. Mise au test de la théorie d’Heckscher‐Ohlin‐Vanek à l’aide d’une expérience naturelle. On utilise un épisode historique de quasi‐élimination de la migration pendulaire entre la Cisjordanie et Israël pour tester trois prédictions clés du modèle de commerce international d’Heckscher‐Ohlin‐Vanek (HOV), et on montre que ces prédictions sont fermement confirmées. Côté production, on utilise la variation entre districts, et on montre que les changements dans les salaires ne sont pas co‐reliés avec la taille du choc enregistré par la force de travail (insensibilité du prix des facteurs), et que les districts qui reçoivent les flux les plus importants de gens qui rentrent dans leur pays après un séjour dans l’autre déplacent leur production vers des industries à forte intensité d’utilisation travail (effet Rybczynski). Côté consommation, les données sont consistantes avec l’hypothèse de préférences identiques et homothétiques, ce qui fait que combinées aux résultats du côté de l’offre, elles supportent le théorème de HOV sur l’intensité en facteurs du commerce international.

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  • Assaf Zimring, 2019. "Testing the Heckscher–Ohlin–Vanek theory with a natural experiment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(1), pages 58-92, February.
    • Handle: RePEc:wly:canjec:v:52:y:2019:i:1:p:58-92
    DOI: 10.1111/caje.12366
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    2. Agostina Brinatti & Xing Guo, 2023. "Third-Country Effects of U.S. Immigration Policy," Staff Working Papers 23-60, Bank of Canada.
    3. Saad, Ayhab F. & Fallah, Belal, 2020. "How educational choices respond to large labor market shocks: Evidence from a natural experiment," Labour Economics, Elsevier, vol. 66(C).

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