A Factor Augmentation Formulation of the Value of International Trade
AbstractWe propose a normative assessment of the value of international trade that is rooted in production theory and embeds Ricardo’s 1817 formulation of the gains from trade into a multi-factor general equilibrium framework. Without imposing strong assumptions on consumer rationality or data from the economy’s autarky equilibrium, our formulation reveals information about both the magnitude and the sources of the gains from trade. A high quality data set on product and task-specific factor employments in 19th-century Japan permits us to apply this approach to answer the following counterfactual: What factor augmentation would have been necessary to compensate the economy for an overnight suspension of trade in its early trade years of 1865-1876? Over the entire period, we find that trade was revealed to be equivalent to a 5.5% increase in Japan's female labour force, a 3.3% increase in its male labour force and a 3.9% increase in its arable land. Efficiency losses associated with a counterfactual suspension of trade averaged between 6.3 and 7.7 percent of the economy’s productive capacity.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3860.
Date of creation: 2012
Date of revision:
gains from trade; factor augmentation equivalent to trade; natural experiment of Japan;
Other versions of this item:
- Daniel Bernhofen & John Brown, . "A Factor Augmentation Formulation of the Value of International Trade," Discussion Papers 12/05, University of Nottingham, GEP.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
- N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yong_Seok Choi & Pravin Krishna, 2000.
"The Factor Content of Bilateral Trade:an Empirical Test,"
2000-11, Brown University, Department of Economics.
- Yong-Seok Choi & Pravin Krishna, 2004. "The Factor Content of Bilateral Trade: An Empirical Test," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 887-914, August.
- 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.
- Keith E. Maskus, 1991. "Comparing International Trade Data and Product and National Characteristics Data for the Analysis of Trade Models," NBER Chapters, in: International Economic Transactions: Issues in Measurement and Empirical Research, pages 17-60 National Bureau of Economic Research, Inc.
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