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Testing the General Validity of the Heckscher-Ohlin Theorem: The Natural Experiment of Japan

Author

Listed:
  • 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.

Suggested Citation

  • Daniel M. Bernhofen & John C. Brown, 2011. "Testing the General Validity of the Heckscher-Ohlin Theorem: The Natural Experiment of Japan," CESifo Working Paper Series 3586, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3586
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3586.pdf
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    References listed on IDEAS

    as
    1. Osamu Saito & Tokihiko Settsu, 2006. "Money, credit and Smithian growth in Tokugawa Japan," Hi-Stat Discussion Paper Series d05-139, Institute of Economic Research, Hitotsubashi University.
    2. 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, vol. 44(4), pages 538-567, October.
    3. 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.
    4. A. D. Woodland, 1980. "Direct and Indirect Trade Utility Functions," Review of Economic Studies, Oxford University Press, vol. 47(5), pages 907-926.
    5. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
    6. 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.
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    More about this item

    Keywords

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

    JEL classification:

    • 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

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