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A Direct Test of the Theory of Comparative Advantage: The Case of Japan

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Author Info
Daniel M. Bernhofen
John C. Brown
Abstract

We exploit Japan's sudden and complete opening up to international trade in the 1860s to test the empirical validity of one of the oldest and most fundamental propositions in economics: the theory of comparative advantage. Historical evidence supports the assertion that the characteristics of the Japanese economy at the time were compatible with the key assumptions of the neoclassical trade model. Using detailed product-specific data on autarky prices and trade flows, we find that the autarky price value of Japan's trade is negative for each year of the period 186875. This confirms the prediction of the theory.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 112 (2004)
Issue (Month): 1 (February)
Pages: 48-67
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Handle: RePEc:ucp:jpolec:v:112:y:2004:i:1:p:48-67

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  1. Kris J. Mitchener & Mari Ohnuki, 2008. "Institutions, Competition, and Capital Market Integration in Japan," NBER Working Papers 14090, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Daniel M. Bernhofen & John C. Brown, 2005. "An Empirical Assessment of the Comparative Advantage Gains from Trade: Evidence from Japan," American Economic Review, American Economic Association, vol. 95(1), pages 208-225, March. [Downloadable!] (restricted)
  3. Kozo Kiyota, 2007. "On Testing the Law of Comparative Advantage," Working Papers 556, Research Seminar in International Economics, University of Michigan. [Downloadable!]
  4. Mototsugu Shintani & Tomoyoshi Yabu & and Daisuke Nagakura, 2008. "Spurious Regressions in Technical Trading: Momentum or Contrarian?," IMES Discussion Paper Series 08-E-9, Institute for Monetary and Economic Studies, Bank of Japan. [Downloadable!]
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