IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_3860.html
   My bibliography  Save this paper

A Factor Augmentation Formulation of the Value of International Trade

Author

Listed:
  • Daniel M. Bernhofen
  • John C. Brown

Abstract

We 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.

Suggested Citation

  • Daniel M. Bernhofen & John C. Brown, 2012. "A Factor Augmentation Formulation of the Value of International Trade," CESifo Working Paper Series 3860, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3860
    as

    Download full text from publisher

    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3860.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    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.
    3. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    gains from trade; factor augmentation equivalent to trade; 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3860. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe). General contact details of provider: http://edirc.repec.org/data/cesifde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.