IDEAS home Printed from https://ideas.repec.org/p/upj/weupjo/15-243.html
   My bibliography  Save this paper

Testing the Heckscher-Ohlin-Vanek Theory with a Natural Experiment

Author

Listed:
  • Assaf Zimring

    (Cornerstone Research)

Abstract

This paper uses the historical episode of the near-elimination of commuting from the West Bank into Israel, which caused a large and rapid expansion of the local labor force in the West Bank, to test the predictions of the Heckscher-Ohlin-Vanek (HOV) mode of trade. I use variation between districts in the West Bank to test these predictions, and find strong support for them: Wage changes were not correlated with the size of the shock to the district labor force (Factor Price Insensitivity); Districts that received larger influx of returning commuters shifted production more towards labor intensive industries (Rybczynski effect); And on the consumption side, the data are consistent with the assumption of identical homothetic preferences, which, combined with the production results, supports the Heckscher-Ohlin-Vanek theorem on the factor content of trade.

Suggested Citation

  • Assaf Zimring, 2015. "Testing the Heckscher-Ohlin-Vanek Theory with a Natural Experiment," Upjohn Working Papers 15-243, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:15-243
    as

    Download full text from publisher

    File URL: http://research.upjohn.org/cgi/viewcontent.cgi?article=1261&context=up_workingpapers
    Download Restriction: This material is copyrighted. Permission is required to reproduce any or all parts.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Daniel M. Bernhofen & John C. Brown, 2009. "Testing the General Validity of the Heckscher-Ohlin Theorem: The Natural Experiment of Japan," Global COE Hi-Stat Discussion Paper Series gd09-058, Institute of Economic Research, Hitotsubashi University.
    2. Sari Pekkala Kerr & William R. Kerr, 2011. "Economic Impacts of Immigration: A Survey," Finnish Economic Papers, Finnish Economic Association, vol. 24(1), pages 1-32, Spring.
    3. Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-446, June.
    4. David Card, 1990. "The Impact of the Mariel Boatlift on the Miami Labor Market," ILR Review, Cornell University, ILR School, vol. 43(2), pages 245-257, January.
    5. Etkes, Haggay, 2011. "The impact of employment in Israel on the Palestinian labor force (2005–08)," MPRA Paper 34681, University Library of Munich, Germany.
    6. Gandal, Neil & Hanson, Gordon H. & Slaughter, M.J.Matthew J., 2004. "Technology, trade, and adjustment to immigration in Israel," European Economic Review, Elsevier, vol. 48(2), pages 403-428, April.
    7. Miaari, Sami & Zussman, Asaf & Zussman, Noam, 2014. "Employment restrictions and political violence in the Israeli–Palestinian conflict," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 24-44.
    8. Angrist, Joshua D, 1995. "The Economic Returns to Schooling in the West Bank and Gaza Strip," American Economic Review, American Economic Association, vol. 85(5), pages 1065-1087, December.
    9. Mansour, Hani, 2010. "The effects of labor supply shocks on labor market outcomes: Evidence from the Israeli-Palestinian conflict," Labour Economics, Elsevier, vol. 17(6), pages 930-939, December.
    10. Guy Michaels, 2008. "The Effect of Trade on the Demand for Skill: Evidence from the Interstate Highway System," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 683-701, November.
    11. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December.
    12. Flaig, Dorothee & Siddig, Khalid & Grethe, Harald & Luckmann, Jonas & McDonald, Scott, 2013. "Relaxing Israeli restrictions on Palestinian labour: Who benefits?," Economic Modelling, Elsevier, vol. 31(C), pages 143-150.
    13. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
    14. Haggay Etkes, 2011. "The Impact of Employment in Israel on the Palestinian Labor Force," Bank of Israel Working Papers 2011.11, Bank of Israel.
    15. Maskus, Keith E., 1985. "A test of the Heckscher-Ohlin-Vanek theorem: The Leontief commonplace," Journal of International Economics, Elsevier, vol. 19(3-4), pages 201-212, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Belal Fallah & Ayhab Saad, 2018. "Schooling Choices’ Responses to Labor Market Shocks: Evidence From a Natural Experiment," Working Papers 1227, Economic Research Forum, revised 18 Sep 2018.
    2. Bilal Nabeel Falah & Marcelo Bérgolo & Arwa Abu Hashhash & Mohammad Hattawy & Iman Saadeh, 2019. "The Effect of Labor-Demand Shocks on Women’s Participation in the Labor Force: Evidence from Palestine," Working Papers PMMA 2019-08, PEP-PMMA.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Assaf Zimring, 2015. "Testing the Heckscher-Ohlin-Vanek Theory with a Natural Experiment," Working Papers 642, Research Seminar in International Economics, University of Michigan.
    3. Daniel Bernhofen, 2010. "The Empirics of General Equilibrium Tade Theory: What Have we Learned?," CESifo Working Paper Series 3242, CESifo.
    4. Ethan Lewis, 2004. "How did the Miami labor market absorb the Mariel immigrants?," Working Papers 04-3, Federal Reserve Bank of Philadelphia.
    5. Donald R. Davis & David E. Weinstein, 2001. "An Account of Global Factor Trade," American Economic Review, American Economic Association, vol. 91(5), pages 1423-1453, December.
    6. Calì, Massimiliano & Miaari, Sami H., 2018. "The labor market impact of mobility restrictions: Evidence from the West Bank," Labour Economics, Elsevier, vol. 51(C), pages 136-151.
    7. Yun‐kwong Kwok, 2006. "Global factor trade with differentiated factor prices and factor intensities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(3), pages 758-780, August.
    8. Artal-Tur, Andrés & Castillo-Giménez, Juana & Llano-Verduras, Carlos & Requena-Silvente, Francisco, 2011. "The factor content of regional bilateral trade: The role of technology and demand," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 157-172, April.
    9. Keith E. Maskus & Shuichiro Nishioka, 2009. "Development-related biases in factor productivities and the HOV model of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 519-553, May.
    10. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
    11. Francisco Requena & Andrés Artal & Juana Castillo, 2008. "Testing Heckscher— Ohlin—Vanek Model Using Spanish Regional Data," International Regional Science Review, , vol. 31(2), pages 159-184, April.
    12. Donald R. Davis & David E. Weinstein, 2001. "Do Factor Endowments Matter for North-North Trade?," NBER Working Papers 8516, National Bureau of Economic Research, Inc.
    13. Gandal, Neil & Hanson, Gordon H. & Slaughter, M.J.Matthew J., 2004. "Technology, trade, and adjustment to immigration in Israel," European Economic Review, Elsevier, vol. 48(2), pages 403-428, April.
    14. Andrés Artal‐Tur & Carlos Llano‐Verduras & Francisco Requena‐Silvente, 2010. "Factor productivity differences and missing trade problems in a regional HOV model," Papers in Regional Science, Wiley Blackwell, vol. 89(4), pages 759-776, November.
    15. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
    16. Donald R. Davis & David E. Weinstein, 2002. "What Role for Empirics in International Trade?," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 57(04), pages 441-468, December.
    17. Kagawa, Shigemi, 2008. "How does Japanese compliance with the Kyoto Protocol affect environmental productivity in China and Japan?," Structural Change and Economic Dynamics, Elsevier, vol. 19(2), pages 173-188, June.
    18. Stephen Redding & Mercedes Vera-Martin, 2006. "Factor Endowments and Production in European Regions," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(1), pages 1-32, April.
    19. James R. Markusen, 2021. "Putting per-capita income back into trade theory," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 10, pages 187-197, World Scientific Publishing Co. Pte. Ltd..
    20. Bernstein, Jeffrey R. & Weinstein, David E., 2002. "Do endowments predict the location of production?: Evidence from national and international data," Journal of International Economics, Elsevier, vol. 56(1), pages 55-76, January.

    More about this item

    Keywords

    Heckscher-Ohlin; factor prices; Rybczynski effect; international trade; natural experiment; West Bank;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:upj:weupjo:15-243. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/upjohus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.