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

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  • Bernhofen, Daniel M.
  • Brown, John C.

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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Suggested Citation

  • Bernhofen, Daniel M. & Brown, John C., 2009. "Testing the general validity of the Heckscher-Ohlin Theorem: the natural experiment of Japan," CCES Discussion Paper Series 13, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    • Handle: RePEc:hit:ccesdp:13
    Note: March 31, 2009
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    References listed on IDEAS

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    1. Alan V. Deardorff, 2011. "The General Validity of the Heckscher-Ohlin Theorem," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 11, pages 91-103, World Scientific Publishing Co. Pte. Ltd..
    2. Tanimoto, Masayuki (ed.), 2006. "The Role of Tradition in Japan's Industrialization: Another Path to Industrialization," OUP Catalogue, Oxford University Press, number 9780198292746.
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    4. 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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    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. A. D. Woodland, 1980. "Direct and Indirect Trade Utility Functions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(5), pages 907-926.
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    Cited by:

    1. Cheng, Wenya & Morrow, John & Tacharoen, Kitjawat, 2012. "Productivity as if space mattered: an application to factor markets across China," LSE Research Online Documents on Economics 48930, London School of Economics and Political Science, LSE Library.
    2. Assaf Zimring, 2015. "Testing the Heckscher-Ohlin-Vanek Theory with a Natural Experiment," Working Papers 642, Research Seminar in International Economics, University of Michigan.
    3. Daniel Bernhofen, 2010. "The Empirics of General Equilibrium Tade Theory: What Have we Learned?," CESifo Working Paper Series 3242, CESifo.
    4. Assaf Zimring, 2015. "Testing the Heckscher-Ohlin-Vanek Theory with a Natural Experiment," Upjohn Working Papers 15-243, W.E. Upjohn Institute for Employment Research.

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    More about this item

    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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