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Testing the HeckscherOhlinVanek 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 HeckscherOhlinVanek 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 HeckscherOhlinVanek theorem on the factor content of trade.

Suggested Citation

  • Assaf Zimring, 2019. "Testing the HeckscherOhlinVanek theory with a natural experiment," Canadian Journal of Economics, Canadian Economics Association, vol. 52(1), pages 58-92, February.
    • Handle: RePEc:cje:issued:v:52:y:2019:i:1:p:58-92
    DOI: 10.1111/caje.12366
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    Cited by:

    1. Amr Ragab & Ayhab F. Saad, 2023. "The effects of a negative economic shock on male marriage in the West Bank," Review of Economics of the Household, Springer, vol. 21(3), pages 789-814, September.
    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).

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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