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

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  • 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.

Suggested Citation

  • 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, vol. 112(1), pages 48-67, February.
  • Handle: RePEc:ucp:jpolec:v:112:y:2004:i:1:p:48-67
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    References listed on IDEAS

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    1. McCloskey, Donald N, 1976. "Does the Past Have Useful Economics?," Journal of Economic Literature, American Economic Association, vol. 14(2), pages 434-461, June.
    2. Douglas A. Irwin, 2001. "The Welfare Cost of Autarky: Evidence from the Jeffersonian Trade Embargo, 1807-1809," NBER Working Papers 8692, National Bureau of Economic Research, Inc.
    3. Yasuba, Yasukichi, 1986. "Standard of Living in Japan Before Industrialization: From What Level Did Japan Begin? A Comment," The Journal of Economic History, Cambridge University Press, vol. 46(01), pages 217-224, March.
    4. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers Archive 11375, Iowa State University, Department of Economics.
    5. Deardorff, Alan V, 1980. "The General Validity of the Law of Comparative Advantage," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 941-957, October.
    6. Duffy, William J. & Yamamura, Kozo, 1971. "Monetization and integration of markets in Tokugawa Japan: A spectral analysis," Explorations in Economic History, Elsevier, vol. 8(4), pages 395-423.
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