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Testing the general validity of the Heckscher-Ohlin theorem: the natural experiment of Japan

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  • Daniel M. Bernhofen
  • John C.Brown

Abstract

We exploit Japan’s 19th century move from autarky to free trade to provide the first test of the general validity of the price formulation of the Heckscher-Ohlin theorem. In this formulation a country's autarky factor price vector imposes a single refutable prediction on the economy’s factor content of trade. Our test combines factor price data from Japan’s late autarky period with Japan's factor content of trade calculated with the technologies of the country of origin of traded goods. The direct and indirect input requirements are constructed from many historical sources, including a major Japanese survey of agricultural techniques and a rich set of 19th century comparative cost studies. Evaluating Japan’s factor content of trade during 1865-1876 at autarky factor prices, we fail to reject the Heckscher-Ohlin hypothesis in each sample year.

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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 11/15.

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Handle: RePEc:not:notgep:11/15

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Keywords: testing the price version of Heckscher-Ohlin; the natural experiment of Japan;

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  1. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, American Economic Association, vol. 77(5), pages 791-809, December.
  2. Daniel M. Bernhofen & John C. Brown, 2004. "A Direct Test of the Theory of Comparative Advantage: The Case of Japan," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(1), pages 48-67, February.
  3. Huberman, Michael & Minns, Chris, 2007. "The times they are not changin': Days and hours of work in Old and New Worlds, 1870-2000," Explorations in Economic History, Elsevier, Elsevier, vol. 44(4), pages 538-567, October.
  4. Woodland, Alan D, 1980. "Direct and Indirect Trade Utility Functions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(5), pages 907-26, October.
  5. Turner,M. E. & Beckett,J. V. & Afton,B., 1997. "Agricultural Rent in England, 1690–1914," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521450539.
  6. 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, American Economic Association, vol. 95(1), pages 208-225, March.
  7. Osamu Saito & Tokihiko Settsu, 2006. "Money, credit and Smithian growth in Tokugawa Japan," Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University d05-139, Institute of Economic Research, Hitotsubashi University.
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Cited by:
  1. Wenya Cheng & John Morrow & Kitjawat Tacharoen, 2012. "Productivity As If Space Mattered: An Application to Factor Markets Across China," CEP Discussion Papers, Centre for Economic Performance, LSE dp1181, Centre for Economic Performance, LSE.
  2. Daniel M. Bernhofen, . "The Empirics of General Equilibrium Trade Theory: What Have We Learned?," Discussion Papers, University of Nottingham, GEP 10/24, University of Nottingham, GEP.

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