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

摘要

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.