Bernhoffen and Brown Testing H-O

American Economic Journal: Microeconomics 2016, 8(4): 5490
http://dx.doi.org/10.1257/mic.20130126
Testing the General Validity

of the Heckscher-Ohlin Theorem
By Daniel M. Bernhofen and John C. Brown*
We exploit Japans mid-nineteenth century transition from autarky to
open trade to test Alan Deardorffs (1982) seminal and parsimonious
autarky price formulation of the Heckscher-Ohlin theorem. Factor
price data from Japans late autarky period impose a refutable
restriction on Japans factor content of trade. Our data are constructed
from many historical sources, including a major Japanese survey
of agricultural techniques and a rich set of nineteenth century
comparative cost studies. Evaluating Japans factor content of trade
during 18651876 under alternative theoretical assumptions about
technology, we provide robust evidence in favor of the HeckscherOhlin hypothesis. (JEL F14, N55, N75, Q10)
e exploit Japans mid-nineteenth century move from autarky to open trade to

provide the first test of a parsimonious version of the Heckscher-Ohlin theorem, as formulated in a seminal paper by Deardorff (1982). Employing autarky factor prices as measures of relative factor scarcity, as originally envisioned by Ohlin
(1933), this Heckscher-Ohlin theorem is stated as a single refutable restriction on
an economys factor content of trade. This restriction implies that in a trading equilibrium, an economy will, on average, export the services of its abundant factors and
import the services of its scarce factors. An attractive feature of this formulation is
that it requires minimal assumptions about preferences and technologies. The main
sufficient condition is that the economy experiences gains from trade. The autarky
factor price formulation of Heckscher-Ohlin takes advantage of the classic insight
about the informational role of prices in a market economy, as articulated in Hayek
* Bernhofen: School of International Service, American University, 4400 Massachusetts Ave. NW, Washington
DC 20016, and CESifo and GEP (e-mail: dbernhof@american.edu); Brown: Department of Economics, Clark
University, 950 Main Street, Worcester MA 01610, and GEP (e-mail: jbrown@clarku.edu). We acknowledge
the generous support of the National Science Foundation Grant SES-0452991 and Leverhulme Trust Grant F/00
ji
114/AM. Tanimoto Mayasuki provided crucial advice on sources and assistance with interpreting sources. Sho
Masahiro, Matsuura Miki, and Nakamura Kana provided excellent research assistance. Gbeton Somasse assisted
with programming the simulations. Earlier versions of this paper were presented at the 2009 NBER Summer
Institute, Clark University, Hitotsubashi University, University of Lausanne, Essex University, Warwick University,
University of Tokyo, University of Nottingham-Malaysia, and Nanyang Technological University. We benefited
from comments by Marius Bruelhart, Don Davis, Gene Grossman, Kozo Kyoto, Tanimoto Masayuki, Ayako
Obashi, Peter Neary, Mathias Thoenig, David Weinstein, John Whalley, and Sugita Yoichi. We are particularly
indebted to Alan Deardorff for his extensive comments on a previous version of this paper.
Go to http://dx.doi.org/10.1257/mic.20130126 to visit the article page for additional materials and author
disclosure statement(s) or to comment in the online discussion forum.
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VOL. 8 NO. 4
BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN
55
(1945). If observed, autarky factor prices embody all the relevant information about
an economys intrinsic factor supply and demand conditions.1
The Heckscher-Ohlin model is cast in a Walrasian framework. As emphasized
by McCloskey (1976, 447), the economies of the nineteenth centurywith their
atomistic competition and relative product homogeneityare much closer to the
assumptions of a Walrasian economy than contemporary economies. The autarky
price formulation of the Heckscher-Ohlin theorem provided in Deardorff (1982)
requires compatible data from a market economy under both autarky and free trade.
Bernhofen and Brown (2004, 2005) provide evidence that Japans rapid integration
into the international economy in the mid-nineteenth century after over two centuries of nearly complete economic isolation is a natural experiment compatible with
the autarky-free trade paradigm of neoclassical trade theory. Our previous research
has shown that Japans commodity trading pattern behaved in accordance with the
law of comparative advantage and provided upper bound estimates of the gains from
trade.2
The natural experiment of Japan is also well suited for a test of the autarky price
formulation of Heckscher-Ohlin. First, as emphasized by Neary and Schweinberger
(1986), the existence of gains from trade is a critical condition for deriving this
prediction. Using a revealed preference formulation, Bernhofen and Brown (2005)
provide empirical evidence that the case of Japan after the end of autarky in 1859
appears to fulfill this condition. Second, the theorem is formulated under two different assumptions for calculating the factor content of trade. The more general version
requires that the factor content of trade is calculated using the factor input requirements at the location of production of the traded goods. Sources from the last third
of the nineteenth century from Japan and its trading partners allow us to calculate
factor usage for the quantities of most of Japans traded products. In addition, the
sources have sufficient detail on production technologies in use at the time so that we
can match factor requirements with the product-level information that is available
on Japanese trade flows during the period of our analysis. The sources for trade data
and technologies allow us to readily include the trade in intermediate goods (raw
materials and semifinished manufactures) of Japans trading partners. By contrast,
matching trade data with the technologies in use at the location of production has
proven a formidable task for analyses of contemporary trading patterns. Measures
of the factor content of trade from modern economies are constructed from industry
level input-output matrices in which thousands of products are grouped into broad
industry aggregates in order to provide some match with available trade data; trade
in nonmanufactured products is usually addressed in a highly aggregated manner.
1
Because autarky factor prices are usually not observed, empirical trade economists have mainly focused on
taking the Vanek (1968) endowment formulation of Heckscher-Ohlin to the data. The endowment formulation
requires only data in the trading equilibrium, but comes at the cost of having to impose strong assumptions on preferences and technologies. See Feenstra (2004, chapters 2 and 3) and Bernhofen (2011) for surveys of the empirical
Heckscher-Ohlin literature.
2
In establishing that Japans trading pattern is compatible with comparative advantage, this previous research
still leaves open the cause of comparative advantage. This paper tests whether relative factor scarcity is a possible
cause. If rejected, one would have to infer the importance of other causes (differences in tastes, technologies, etc.).
The question of how to distinguish between the different causes is beyond our theoretical framework.
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AMERICAN ECONOMIC JOURNAL: MICROECONOMICS
NOVEMBER 2016
Our test combines factor price data from Japans late autarky period with commodity trade data and home and foreign technology matrices from the early free
trade period, which we define as 1865 through 1876. The construction of the technology matrices draws upon about 250 sources, including a major Japanese survey
of agricultural techniques and a rich set of comparative cost studies from the last
third of the nineteenth century. The study of the production conditions suggests
that a five factor classification, which includes skilled male labor, unskilled male
labor, female labor, capital, and land, is appropriate. The autarky factor price data on
wages, rental rates of capital and of land are available from the studies that Japanese
economic historians have conducted on primary source materials from the period.
Our test of the price formulation of the Heckscher-Ohlin theorem values the factor content of Japans trade in each year of the early trading period at the factor
prices prevailing during the late autarky period (18501857). Since the inner product is positive in every trading year, our results provide strong empirical support for
the general Heckscher-Ohlin prediction. Our test results are robust to adjustments
for trade imbalances, potential differences in the price of cropland across the core
economic regions of autarky Japan and observed variations in factor prices, and the
parameters of production technologies.
Our paper is organized as follows. Section I presents the autarky price formulation of the Heckscher-Ohlin theorem. Section II discusses the natural experiment of
Japan, the empirical domain and the data sources for the construction of the factor
content of trade, and the autarky factor prices. Section III contains the empirical
results and investigates robustness. We conclude in Section IV.
I. Autarky Price Formulation of Heckscher-Ohlin
Consider a neoclassical economy, called home, where m factors are potentially

employed in the production of n goods. Technology is characterized by a technology
set consisting of feasible pairs (V, Y), where Y = (Y1, , Yn) is a vector of production levels resulting from the factor employment vector V = (V1, , Vm).3 The
economys fixed factor endowment vector is given by V0, and the corresponding
vector of factor prices is denoted by w = (w1, , wm).
Consumer demands are denoted by C = (C1, , Cn). Consumers respond to
domestic goods prices, denoted by p = ( p1, , pn), and are assumed to conform in
the aggregate to the weak axiom of revealed preference (WARP)4:
(1)
p 1 C 1 p 1 C 2 => p 2 C 1 > p 2 C 2.
The WARP has the standard interpretation that if the consumption point C 1 was
chosen at the price regime p 1 at which C 2 could have been affordable, then if C 2
was chosen at the price regime p 2, C 1 could not have been affordable.
3
We assume that the technology set fulfills all the standard neoclassical assumptions, such as closedness and
convexity, which are required to ensure the existence of an autarky and trade equilibrium.
4
This characterization of aggregate preferences is more general than assuming the existence of a community
utility function.
VOL. 8 NO. 4
57
We consider two equilibria, autarky, and trade. The superscripts a and t identify
the variables associated with the two equilibria. Under autarky, production coincides
with consumption, i.e., Y a = C a, and autarky goods and factor price vectors p a and
w a are such that production is feasible; there is no excess demand; and producers
maximize profits. Profit maximization implies that
(2)
pa Ya wa V0 pa Y wa V
for all (V, Y) in .
In the trade equilibrium, the consumption vector, C t, will generally be different

from the economys production vector, Y t, and the difference is the economys net
import vector, T = C t Y t, with the rest of the world (ROW). Opening up the
economy to international trade results in a change in goods and factor prices; the
price vectors under open trade are given by p t and w t.5 The trade equilibrium is
characterized by production and trade being feasible, no excess demand, and by
producers maximizing profits. In the trade equilibrium, profit maximization implies
that
(3)
pt Yt wt V0 pt Y wt V
for all (V,Y) in .
In a trading equilibrium that allows differences in factor prices across economies,

there are different ways of defining the factor content of trade. Following Deardorff
(1982), we consider two approaches. The first approach calculates the economys
factor content of trade using domestic (Japanese) techniques of production, while the
second approach calculates the factor content of trade at the location of production.6
It is convenient to express the economys net import vector, T, in terms of its
gross import and export components, i.e., T = (X, M), where X denotes the
vector of goods that are exported and M the vector of goods that are imported in
the trade equilibrium.7 The domestic technology matrixA dis then defined as
A d = (A JX, A JM), where the submatrices A JX and A JM pertain to the Japanese factor
requirements of exports and imports, respectively. The corresponding factor content
of trade is then given by F d = A d T = A JM M A JX X.
In the second approach, the (location of production, or lp) technology matrix is
given by A lp = (A JX A ROW
M ). Since exports are produced in Japan, the first submatrix,
A JX, is the same as above. The second submatrix, A ROW
M , contains the input requirements of Japans imported goods evaluated with the technologies at the location of
foreign production. The factor content of trade calculated with technologies at the
J
8
location of production is then calculated as F lp = A lp T = A ROW
M M A X X.
5
Trade restrictions could lead domestic prices under open tradep tto differ from world prices.
Deardorff (1982) also mentions that the factor content can be calculated based on the actual content of consumption. However, because we do not have consumption data, we do not consider this third possibility.
7
This exploits the models property; there is no two-way trade: a good is either exported or imported in equilibrium. This property holds in the case of Japan during our study period.
8
If all imports come from a single foreign economy, A ROW
M is just the matrix of foreign input coefficients. If the
imports come from multiple countries, it is necessary to trace back the production history of each imported good
and add up both of the factors used directly in production plus those used indirectly through the production of
intermediate inputs. Because nineteenth century trade was less complex than trade in contemporary economies, it
is more manageable to calculate F lp for Japans nineteenth century trading case.
6
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NOVEMBER 2016
The standard Heckscher-Ohlin formulation assumes identical technologies across

countries. An advantage of testing the Heckscher-Ohlin theorem in the context of
a single economy setting is that we do not need to assume identical technologies.
However, if the factor content of trade is measured with the technologies at the location of production, we need an additional assumption, which is stated as follows.
If the economys endowment vector V 0 were augmented by the factor content of
trade, F, then it would be technologically feasible to produce the trade consumption
vector C t domestically. Formally,
(4)
(V 0 + F, C t)
is in .
If the factor content of trade is calculated using domestic production techniques,

i.e., F = F d, condition (4) will be satisfied without having to impose any assumptions about foreign technologies. If one assumes identical technologies in home and
ROW, as in Deardorff (1982), then (4) will also hold if the factor content of trade
is calculated using techniques at the location of foreign production, i.e., F = F lp.
However since (4) is weaker than assuming identical technologies, and we dont
need the identical technology assumption for anything else, we interpret (4) as a
restriction on technologies.9 In the context of this study, assumption (4) can be
thought of as ruling out extreme cases of technological differences without having to
assume identical technologies between home and ROW. If, for example, the domestic economy is technologically very inferior in many of its import goods relative to
ROW, using foreign input coefficients to augment domestic endowments might not
be sufficient to produce C t domestically. Assumption (4) imposes a restriction on
the extent of technological differences that prevents this from happening.
Balanced trade occurs at the world price vector p w, i.e., p w T = 0, which can be
different from the domestic price vector p t because of trade restrictions. We need to
assume that trade is, on average, more taxed than subsidized, which can be written
as:
(5)
(p t p w)T 0.
The intuition for this is that trade taxes, although reducing the volume of trade, do
not interfere with the comparative advantage pattern of trade prediction. In contrast,
trade subsidies can be so large that they prompt trading patterns that override underlying factor scarcity fundamentals.10 We are now in the position to state the autarky
price formulation of Heckscher-Ohlin:
HECKSCHER-OHLIN AUTARKY PRICE THEOREM: Consider a single economy characterized by (1)(5). The economys autarky factor price vector imposes
a restriction on the vector F i (the economys factor contents of trade), such that
w a F i > 0, for i = d, lp.
Deardorff (1982) needs to assume identical technologies because his Heckscher-Ohlin formulation involves
multiple countries under autarky and trade.
10
Europes Common Agricultural Policy provides a classic example.
9
VOL. 8 NO. 4
59
PROOF:
The balanced trade condition and (5) imply p t T 0. Using the definition of
the net import vector and applying autarky consumption to the right-hand side
of (3) yields p t C t p t T w t V 0 p t C a w t V 0. Rearrangement gives rise to
p t C t p t C a. The weak axiom of revealed preference (1) implies then that
p a C t > p a C a. Employing (2) and (4), we obtain p a C a w a V 0 p a C t
w a(V 0 + F i), for both measures of the factor content of trade, i = d, lp. But the
latter inequality can be rearranged to w a F i p a C t p a C a > 0.
In the above formulation, the economys autarky price vector imposes a single
restriction on the economys factor content of trade. The restriction constitutes a
prediction about the pattern of trade of all factor services, but is silent about the
direction of trade in any individual factor. However, the prediction can be interpreted as saying that the economy will, on average, export the services of the factors
with a low autarky price and import the services of the factors with a high autarky
price. The modest data requirements of this approach stem from the fact that autarky
prices convey all the relevant information about the economys relative factor scarcities in the absence of international specialization.
The existence of gains from trade, as formulated by the weak axiom of revealed
preference, is the key critical assumption for the derivation of the prediction.
Neary and Schweinberger (1986) have pointed out that when the factor content
of trade is measured with domestic technologies, (4) is not needed to derive this
Heckscher-Ohlin prediction. However, Deardorff (1982, 689) and Ethier (1984, 175)
have stressed that the path to a general formulation of Heckscher-Ohlin requires the
use of technologies based on the location of production. Measuring the factor content of trade at the location of actual production allows us to observe how home and
foreign factor input requirements interact with autarky measures of factor scarcity
for a trading economy. The Heckscher-Ohlin theorem states a restriction on the factor content of trade that will emerge from this interaction. However, as a trade-off,
we need to assume that the technological differences are not too severe, which
is captured by condition (4). In our subsequent empirical analysis, we will test the
prediction using both definitions of the factor content of trade.
II. Empirical Implementation and Construction of Data
A. Experimental Conditions and Domain

The static trade model presented in Section I requires that the Japanese economy
meet four basic conditions during the period of autarky from which data are collected (circa 1850 to 1857) and the initial period of open trade.
(i) Markets for goods were competitive under autarky and trade.
(ii) Japan produced relatively homogeneous products in small scale production units; other explanations for Japans trading patterns such as increasing
returns to scale or imperfect competition are thus ruled out.
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NOVEMBER 2016
(iii) After its opening up, the economy operated under a trade regime in which the
countrys exports did not receive substantial subsidies.
(iv) The factor prices observed during autarky were outcomes of competitive market conditions, including factor mobility and the absence of market power.
The recent historical literature on Japan summarized in Hayami, Sait, and Toby
(2004) provides evidence that the Japanese economy met conditions (i) and (ii).
Most tradable goods were produced by farmer households and small-scale merchants. With the exception of a few coal and copper mines, traditional Japanese
technologies ensured that metals and other processed raw materials would be produced in small workshops or firms. Bernhofen and Brown (2004, 58) discuss the
absence of export subsidies (assumption (iii)) during the early period of open trade.
The fourth assumption has been the subject of recent research on factor markets,
particularly during the late Tokugawa era (roughly 1820 to 1868).11 This research
has successfully challenged the view of Marxist scholars that feudal restrictions
imposed by the Tokugawa regime on land and labor markets mattered significantly
(2009, 174) concludes that although
until the Meiji era reforms of the 1870s. Saito
the formal transfer of landholding rights remained difficult to carry out, mortgage
and pawning institutions meant that tenancy came to function as if there had existed
a genuine lease market for land.12
The pace of economic change hollowed out the regulations from the seventeenth
century that attempted to limit the movement of the population; the growth of rural
industry and reforms during the 1840s hastened the end of the restrictions on entry
(2009, 186)
into manufacturing imposed by the urban guilds of Osaka. As Saito
notes, by the first half of the nineteenth century there was a well-integrated labor
market between the peasant farm household and nonfarm sectors within a regional
shu
setting. Nishikawa (1978) draws on detailed village-level data from the Cho
domain in the early 1840s to establish that market wages outside of agriculture were
close to the value of the marginal productivity of labor on the farm.
and Settsu (2006) summarize historians understanding of urban and rural
Saito
credit markets in Japan during the late Tokugawa period. Borrowing and lending by
feudal lords and merchants was widespread; in rural areas, the pawning market in
land offered a way for landowners to receive credit. An additional issue is whether
financial intermediation also took place. Toby (2004) offers one answer to this question with his detailed examination of the ledgers of a family engaged in lending in a
small town outside the main urban areas. Based upon the levels and trends in quoted
interest rates for interbank borrowing, the geographic reach of the familys borrowing and lending, and evidence from other studies, Toby (2004, 319) concludes
and Settsu (2006, table 3) report
that a national credit market was in play. Saito
11
The Tokugawa family ruled Japan as a quasi-military regime until the Meiji Revolution of 1868, which reasserted the central role of the emperor and initiated Japans modernization.
12
(2009, 171) and Kalland (1995, 27678) for a discussion of the pawning and mortgage institutions
See Saito
that allowed for short-term transfers of land.
VOL. 8 NO. 4
61
evidence that rural interest rates in the Kinai (the region around Osaka) were about
10.5 percent for pawning and mortgage contracts.
The theoretical prediction is based on a static model combining data under autarky
and open trade, but without accounting for the passage of time. However, since
autarky and free trade are observed at different points in time, a correct empirical
inference requires that the economys factor scarcity conditions were not affected
in the transition from autarky to the early free trade period. Furthermore, while the
static theory necessarily assumes balanced trade, an actual economy will typically
experience periods of imbalanced trade during particular time periods.
These considerations lead us to the following two additional conditions:
(v) The observed sign of the inner product is caused by Heckscher-Ohlin forces
and not by an underlying trade deficit.
(vi) During the transition from autarky to free trade, the economy did not
experience changes in preferences, technologies, or the composition of its
endowments.
If the country is running a trade deficit, then the sign of the inner product might
just reflect its excess factor imports rather than Heckscher-Ohlin forces. This is
most easily seen by considering the stark hypothetical case where the country only
imports but does not export anything. In such a scenario the autarky value of net
imports is positive, but this is not informative about Heckscher-Ohlin. Fortunately,
Japans trading pattern during the first years of trade included some years of surplus
and other years of deficits so that we can investigate robustness regarding trade
imbalances. We will discuss our strategies for how we address trade imbalances
when we present our results in Section III. This brings us to the sixth condition.
The transition from autarky to open trade exposed the Japanese to encounters
with western preferences and new steam-based technologies. To keep the autarky
and free trade regimes compatible with the theoretical requirements, we focus on
the first period after the open trade regime was established in 1859.13 During this
period, preferences were reasonably stable and the economy did not experience significant changes in technologies. Despite the enthusiasm of some elites for western
culture and institutions after the Meiji restoration of 1868, preferences for consumption remained largely unchanged during the first two decades of open trade. The
imports most sensitive to changes in tastes would have been cotton and woolen
textiles, which accounted for one-half of Japans imports during the early trade
period. Nakagawa and Rosovsky (1963) lay to rest the notion that the Meiji restoration in 1868 led to an abrupt changeover in Japanese fashion to western styles of
clothing. Instead, as Jenkins (1988), Uchida (1988), and Tamura (2004) point out,
imported cotton and woolen cloths were used in the traditional kimono and to fabricate loose-fitting outwear (haori). The Japanese likewise adapted the weaving of
13
For reasons discussed below, our analysis begins in 1865.
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NOVEMBER 2016
cotton cloth on traditional hand looms to imported machine-spun yarn. The marketing strategies of western merchants assumed continued use of traditional clothing.14
During the first two decades of open trade, virtually all of Japanese production
of tradable goods continued to rely upon traditional technologies. Contemporary
observers suggest a rate of interest that was high relative to the price of labor was
one important reason for the persistence of labor-intensive methods and the failure
to rapidly adopt steam technologies. A comment in the leading German publication
on international trade notes that nominal interest rates of 18 percent circa 1874 made
mechanization of silk reeling using the steam technologies found in France or Italy
unprofitable.15 It appears that steam technologies for drilling oil wells and pressing
the oil used to produce Japanese wax were also unprofitable when compared with
traditional hand technologies.16 By the close of the test period (1876), the Meiji
government and some western investors had introduced some western methods in
government-run armories and a handful of coal and copper mines, but most steps in
the processes continued to use traditional Japanese technologies. Land transportation
continued to rely upon pack horses. The largest change occurred in coastal shipping,
where some steamships and western sailing vessels supplemented the Japanese merchant fleet of traditional junks. Unlike in Latin America, the Anglo-Saxon regions of
recent settlement, or colonial Africa, as they were integrated into the international
economy, imports of foreign capital played virtually no role in the establishment and
construction of modern transportation systems or industry in Japan.
The supply of labor did not change substantially in the first decades following the
opening up to trade. Biraben (1993, table 7) concludes that the population would
have grown about 8 percent over the test period. Mortality and birth rates do not
show a strong break with trends evident during the period prior to the opening up,
which allows us to rule out dramatic changes in the age structure or sex ratios of the
population. There was virtually no emigration or immigration. Two reforms associated with the Meiji revolution that later influenced labor supply were not consequential for the test period. The introduction of universal conscription for military service
affected only about 2 to 3 percent of those aged 2023 during the early-to-mid
1870s. The Meiji governments programs to commutate the stipends of the samurai,
which had the potential to augment the labor force by about 9 percent, only began to
affect the labor force participation of former samurai in the late 1870s. By then, all
samurai had been required to accept compulsory commutation of stipends that left
them with at best a few years of income.17
See also Jordan and Stve (1872a, b). Jordan and Stve (1872b) report that the use of woolen cloth for western dress was restricted to government uniforms of various kinds and some of the wealthiest classes.
15
See Goering and Stve (1875, 18991). The paper yen maintained a relatively constant exchange rate against
the Mexican silver dollar from 1871 through early 1878, which suggests that real interest rates in silver terms were
relatively high. See Masayoshi (1899, table IX).
16
See Lyman (1879, 25859) and Gribble (1888, 99).
17
See Rokuhara (2005), Harootunian (1960), and Flath (2005). A guaranteed income of four to six years (allocated between cash and bonds) replaced the lifetime stipends.
14
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63
B. Hypothesis
We exploit the circumstances of Japans opening up to trade to test the following
hypothesis about the sign of Japans vector of net factor imports valued at autarky
factor prices:
(6)
H0: w a F ik = w a(A i Tk) > 0,
where A i(i = J, lp) is either the technology matrix using (domestic) Japanese
technologies (i.e., A J = (A JX,A JM)) or the technology matrix using technologies at
the location of production (i.e., A lp = (A JX,A ROW
M )); Tk is the vector of net imports in
each test year k (k = 1865, , 1876); and w a is the vector of autarky factor prices.
C. Construction of the Trading Vector T, the Technology Matrices A J and A lp,
and the Autarky Price Vector w a
The Data Appendix provides information on sources for X and M and the
approach used to construct the benchmark technology matrices of Japan and of its
trading partners. Although open trade officially began on July 4, 1859, the Tokugawa
regime only abandoned efforts to limit exports of silk and silkworm eggsJapans
dominant exportsafter western military action in 1864. For that reason, the tests
of the hypothesis use trade data starting in 1865 and continuing through 1876. The
abundant documentation allows us to define the trading vector at the level of individual products.18 For example, an unfinished lighter cotton cloth known as gray
shirtings accounted for one-tenth of Japanese imports by value over the entire test
period and about four-fifths of the volume of imported cotton cloth. This cloth was
an export staple of Great Britain with the most common weight of 8.25 pounds (lbs.)
per piece with a length of 40 yards and a width of 39 inches; consular reports and
English-language newspapers provided regular quotes of its price.19 The commentary provided by the foreign consuls stationed in the treaty ports permits identification of the chief country supplying a particular product. With the well-documented
exceptions of woolens imported from France and Germany, Great Britain accounted
for about 80 percent of imports of manufactures. Imports of food and raw cotton
were from Cochin-China (southern Vietnam), China, and Formosa. India provided
indigo and the United States provided kerosene. The level of detail on products permits a close match between the A ROW
M matrix and the import vector.
This close match between traded products and technologies implies a striking
difference between the A matrices used in this study and those used to measure the
factor content of trade in contemporary economies, which are typically aggregated
18
The Data Appendix lists the specific sources for the surveys of trade conditions conducted by Prussian,
Austro-Hungarian, and Swiss observers in the 1860s. Note that a fire destroyed the returns of trade data for the
largest treaty port, Kanagawa, in 1866, so that year is excluded from the hypothesis test. Imports such as cotton yarn
or brown or muscovado sugar would be classified at the six to eight digit level of an industry using the Harmonized
System (HS) Code. The details available on the construction and fiber content of imported textiles places them at
the eight digit level or better.
19
Many of Japans imports during this period met the definition of homogenous commodities offered in Rauch
(1999).
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NOVEMBER 2016
at the two-digit industry level. Another distinction is the classification of factors

of production. Historical sources suggest three essential features of technologies
of traded products during the last third of the nineteenth century: the division of
labor by sex, significant cross-national and cross-industry differences in the mix of
types of labor, and the importance of intermediate inputs including agricultural raw
materials.20 For these reasons, the matrix uses three categories of labor measured in
days per unit of physical output: skilled male, unskilled male and female. The fourth
at the
factor is capital, which is the user cost of capital measured in terms of gold ryo
21
ryo s purchasing power of 18541857. The final factor is land. To facilitate comparisons with Japanese sources, land is measured in terms of tan of dryfield land,
which was used for crops such as cotton and soybeans not grown on the flooded
paddies used for rice.22 The treatment of land took note of Trefler (1993), who
argues for recognition of differentials in land quality. Although most land used in the
production of agricultural commodities could be treated as equivalent to Japanese
dryfield land, this does not hold for characterizing cross-national differences in the
technologies used to produce raw wool. European producers of wool relied upon
a mix of both cropland (for feed such as turnips) and pastureland. Wool producers
in the southern hemisphere (Argentina, Uruguay, South Africa, Australia, and New
Zealand), which supplied a growing share of the world market after 1860, relied
exclusively on grasslands that yielded much less in forage per acre than pastures
in Europe. For these reasons, the amount of measured land used in the production
of wool was expressed as an arable (dryfield) land equivalent. The ratio of rent or
value of pastureland relative to cropland was used to make this adjustment. For
the semiarid grazing lands of Australian sheep farms, the adjustment reduced the
measured amount of land used in the production of Australian wool by about 80 to
90 percent.23
The A JX matrix used in this study includes 20 different products. As has been
typical for most middle and lower income economies since the eighteenth century,
exports reflected specialization in a narrow range of products. About 80 percent
of Japans exports were concentrated in raw silk, silkworm eggs, and green tea.
For these products, the exhaustive survey of agricultural techniques known as the
ji Cho
sa carried out in the 1880s provides detailed information on technoloNo
gies. Copper, various maritime products, mushrooms, camphor and vegetable wax
accounted for almost all of the rest. The construction of the A JX matrix recognized
that most production of tradeable goods took place in vertically disintegrated and
non-specialized rural households, which were linked together by a network of merchants and markets. Japanese and western sources document all stages of production
processes, so that the resource requirements for domestically produced intermediate goods such as mulberry leaves, cocoons, fish fertilizer, coal, charcoal, and
20
The Appendix provides a more detailed discussion of the rationale for and measurement of the five factors.
was the gold-based currency of Japan until it was replaced with the yen in 1871 at one-to-one.
The gold ryo
values for years other than 18541857 were deflated using the index of non-tradable goods found in
Yen and ryo
Shinbo (1978, table 510). The user cost of capital includes reported expenses for maintenance of capital, depreciation, and an opportunity cost of capital (implicit interest) of 10.5 percent.
22
The tan is about one-tenth of a hectare or one-quarter of an acre.
23
The Data Appendix details the procedures used to make these adjustments. The results are presented in
Appendix Table A2.
21
VOL. 8 NO. 4
65
firewood can be readily included in the calculation of the total factor requirements.
For example, the production of one kilogram of raw silk, Japans most important
export, required about 30 days of male labor and nine days of female labor. Of this
amount, almost one-half of the male labor was required for raising mulberry leaves,
since one kilogram of raw silk requires about 125 kilograms of leaves to feed the
silkworms. Finally, note that since various byproducts of silk production were generally retained for domestic use, input requirements were adjusted upwards on the
assumption that all production was of high quality cocoons and silk. The fraction of
the byproducts that was exported could then be treated as pure joint production.24
For the A JX matrix, workers on the farm are included among unskilled workers.
The category of skilled male workers includes production workers with specialized
skills (such as smelters, silk sorters, or tea dryers) and owner-operators of specialized small firms such as fishermen. Capital costs took account of the relatively high
rates of depreciation of wooden tools and equipment and the high rates of interest
that prevailed in Japan during the test period.25
Panel A of Table 1 shows selected columns of the A JX matrix for the nine most
important Japanese exports during the test period. Note that a standard two-digit
industry-level classification would group both raw silk and tea in the same industry (ISIC rev.4. code 01, United Nations Department of Economic and Social Affairs
Statistics Division 2008), despite the fact that unit resource requirements for raw silk
are about 10 to 50 times those for tea.26 The other striking feature of panel A is the
importance of male unskilled labor, particularly in the production of silk and silkworm
eggs. The nine products in the table accounted for 85 percent of the value of exports.
Overall, the 20 products in the A JX matrix cover 93 percent of the value of exports.
The construction of the A JM matrix, which includes 19 products, used the same
five factors of production. Panel B of Table 1 provides selected products of the
A JM matrix. As a rule, products imported into Japan, including food products and
intermediate goods such as bar iron, cotton yarn, and unfinished cotton cloth (gray
shirtings), were close substitutes for products produced during autarky.27 The exceptions are finished cotton cloth and woolens. The calculation of factor requirements
for imported finished cotton cloth used as a basis the standard Japanese striped cotton cloth (shima-momen), which was a popular finished cotton cloth during the late
Tokugawa era. Resource requirements for the amount of yarn used in these cloths
were adjusted upwards (for velvets) or downwards (for calicos) based upon the
weight of imported cloths.
24
Byproducts included waste cocoons, pierced cocoons, tama or dupioni silk from double cocoons, noshi silk,
and floss (waste) silk. Dupioni silk is from double cocoons and inferior in quality to raw silk from single cocoons.
Likewise, noshi and waste silk are from the first part of the reeling process and inferior in quality to raw silk.
25
and Settsu (2006) for a review of the available evidence on interest rates in rural Japan.
See Saito
26
By weight, market prices for silk were 15 times the price of tea and 40 or 50 times the price of dried cuttlefish.
Strictly speaking, the coefficient on land for sericulture overstates its land intensity. Syrski (1872, 23031) and
other observers noted that mulberry trees were traditionally grown on marginal land such as the borders of fields
that would not be used as cropland. Only by the 1890s did mulberry begin to compete with other crops for the use
of dryfields in the silk-producing Gunma prefecture. See Gunma Kenshi Hensan Iinkai (1988).
27
As Tanimoto (1993) points out, the hand spun Japanese yarns did not have as hard a twist as the equivalent
English import. The relatively small amount of imports above counts of 20s could not be produced using Japanese
hand technologies. Imported shirtings, which used middle counts of yarn (30s and low 40s), were thus near but not
perfect substitutes for cloths that could be produced in Japan.
66
NOVEMBER 2016
Table 1Factor Input Requirements of Major Exports and Imports

Factor
Silk
Silkworm
eggs
Green tea
Copper
Panel A. Input requirements of major exports (A JX matrix)

Skilled male
2.702
0.228
0.204
0.245
Unskilled
male
Female
)
Capital (ryo
Land (tan)
17.542
1.071
0.567
0.346
Dried
Seaweed cuttlefish
Coal
Vegetable
wax Mushrooms
0.005
0.015
3.694
0.000
0.000
0.011
0.020
1.537
0.227
0.585
5.574
0.078
0.607
0.042
0.016
0.000
0.023
0.000
0.000
0.468
0.025
0.015
0.007
0.001
0.000
0.006
0.004
0.000
0.343
0.017
0.021
0.006
0.000
0.000
0.004
0.000
0.015
Export share
0.400
0.120
0.240
0.024
0.020
0.012
0.019
0.010
0.011
Unit
catty
card
catty
catty
catty
catty
ton
catty
catty
Panel B. Input requirements of major imports, measured with Japanese technologies of closest substitute product (A JM matrix)
Light
Cotton
Hakata
Iron
Cotton cotton
stripes
Chirimen Habutae
obi
Brown
White
manufac- Raw
Factor
yarn
cloth
(cotton)
(silk)
(silk)
(silk)
Rice
sugar
sugar
tures cotton
Skilled male
0.179
0.026
0.238
1.644
0.582
3.606
0.641
0.041
0.098
0.196
0.100
Unskilled
male
0.782
0.115
0.255
3.026
3.179
5.801
8.813
0.254
0.544
0.132
0.715
Female
)
Capital (ryo
Land (tan)
3.868
1.042
2.111
1.625
1.450
3.046
1.752
0.027
0.053
0.000
0.610
0.016
0.002
0.005
0.079
0.083
0.154
0.075
0.018
0.039
0.001
0.014
0.015
0.002
0.005
0.071
0.076
0.137
0.430
0.001
0.003
0.005
0.014
Import share
0.138
0.112
0.082
0.070
0.029
0.043
0.081
0.065
0.028
0.026
0.021
Unit
catty
yard2
yard2
yard2
yard2
yard2
catty
catty
catty
catty
catty
(A ROW
M
matrix)
Panel C. Input requirements of major imports, measured at location of foreign production
Mousseline
Finished
de
Orleans/
Cotton
Grey
cotton
Laine
Lustres Camlets
Brown
White
Factor
yarn shirtings
cloth
(woolen) (woolen) (woolen) Rice
sugar
sugar
Iron
manufac- Raw
tures cotton
Skilled male
0.011
0.004
0.008
0.035
0.02
0.045
0.000
0.031
0.080
0.018
0.000
Unskilled
male
0.414
0.024
0.071
0.060
0.07
0.165
0.012
0.014
0.037
0.005
0.848
Female
)
Capital (ryo
Land (tan)
Import share
Unit
Source
0.361
0.019
0.033
0.012
0.06
0.113
0.006
0.002
0.005
0.013
0.532
0.021
0.006
0.012
0.041
0.10
0.162
0.001
0.002
0.006
0.003
0.001
0.061
0.005
0.012
0.072
0.03
0.127
0.006
0.031
0.080
0.000
0.018
0.138
0.112
0.082
0.033
0.064
0.032
0.081
0.065
0.028
0.026
0.021
catty
catty
catty
yard2
yard2
yard2
yard2
yard2
catty
catty
catty
Great
Britain
Great
Britain
Great
Britain
France/
Germany
Great
Britain
Great
Britain
IndoChina
Formosa
Formosa
Great China
Britain/
Belgium
Notes: All labor requirements are measured in days per unit of output. According to de Bavier (1874, 73), a card of
silkworm eggs weighed about 25 grams. A catty is 1.33 pounds. One tan is about 0.25 acres or 0.1 hectares. Cotton
stripes (shima-momen) was the most common finished cotton cloth produced in Japan under autarky. The example for a finished cotton cloth in panel C is for a medium weight dyed cloth such as shirtings dyed with indigo. The
shares of exports and imports refer to the value of total trade over the sample period 1865 through 1876 measured
at the prices prevailing under open trade. For the procedure used to estimate the allocation of types of silk cloth to
equivalents in terms of woolens, please see the text.
Source: For a discussion of the sources used to construct the three A matrices, please see the Data Appendix.
Since autarky Japan lacked the pastureland that could sustain pastoral agriculture (including raising sheep), woolen and worsted cloths were not produced. Yet,
wool cloth and worsteds were an important import into Japan during the early trade
period as substitutes primarily for silk cloth. The research of Tamura (2004) and
other accounts provided the information necessary to use the weight and structural
characteristics of woolens to map imports into equivalent quantities of one of three
VOL. 8 NO. 4
67
silk cloths, which are found in panel B of Table 1: chirimen (silk crepe), habutae
(plain silk cloth), and hakata obi (silk belting).28
ji Cho
sa also provided the data for the factor requirements for rice, soyThe No
beans, raw cotton, sugar cane, and indigo. Other sources discussed in the Data
Appendix provided detail on the factor requirements required for processing cane
sugar, manufacturing indigo dye and converting raw cotton into yarn, weaving cotton cloth, and producing shima-momen and the three silk cloths. Extensive contemporary studies of Japanese mining, oil refining technologies, and metallurgy
were used to calculate the domestic resource requirements for mineral and kerosene
imports. All the products in the A JM matrix cover about 80 percent of the value of
imports during the test period.
In order to take full account of the heterogeneity of production conditions across
matrix used inforsupplier countries and products, the construction of the A ROW
M
mation on the production location of the largest supplier to the Japanese market.29
matrix and includes the
Panel C of Table I presents selected columns of the A ROW
M
primary source country (or countries) for each import. This approach allowed for a
more accurate accounting of direct and indirect factor usage, particularly for imports
of cotton and woolen textiles that often were manufactured from raw materials produced in other countries. For example, depending upon the cloth, the British used
yarn spun from Indian or American cotton and indigo dye imported from India. The
woolen industries of Europe produced cloths that varied according to the use of worsted, woolen, and cotton yarn; the use of power or hand looms; the source of wool
(domestic or imported from the southern hemisphere); and the amount of finishing.
Fortunately, documentation is available on these industries for the most important
textile imports.
includes information on five different groupings of
Overall, the matrix A ROW
M
cotton cloth and eleven groupings of woolen cloths. In addition, it includes input
requirements for fourteen other products.30 The matrix also includes weapons and
ammunition, which are not covered in the A JM matrix. Similar to the A J matrices,
the resource requirements for imports were assigned to the three categories of labor,
capital, and land. Capital was measured in current value yen at the appropriate pre of 18541857 using the procevailing exchange rate. It was then expressed in ryo
dure discussed in footnote 21.
A comparison of Table 1 panel B with panel C reveals that imported textiles for
the most part used less labor and capital per square yard, but required more land than
Japanese equivalents or substitutes. Agricultural products imported from other Asian
countries also used more land than the equivalent product produced in Japan. Even
after making adjustments for differences between the quality of pastureland and
arable land, woolen and worsted cloths could require much more dryland-equivalent
For example, merino cloth and its wildly popular successor, mousseline de laine (woolen muslins), were used
for lightweight summer kimonos. Camlets enjoyed early popularity as belting material. Only a small quantity of
imports of woolens such as buckskins were used to manufacture western-style uniforms for the army and some
government employees. These were assigned to a heavier version of habutae.
29
Evidence for the main supplier comes from the commercial reports of the western countries, other contemporary accounts, and direction of trade statistics.
30
The largest category lacking information is for imported ships and cannons. Both were important imports in
18651868, but not quantitatively important in terms of relative trade values.
28
68
NOVEMBER 2016
acreage per square yard than cotton cloth. For that reason, woolens manufactured
with a mix of cotton and worsted yarn, such as the lightweight Orleans and lustres,
were the least intensive in the use of land.
The wage elements in the vector of factor prices w a, which is found in the second
column of Tables 2 (and Table 3), are the average of all the observations available
from historical sources. The price of capital is set as the numraire. Rents on land
differed substantially between autarky Japans two core economic regions: the Kinai
, which is centered on
in the West (centered on Kyoto and Osaka) and the Kanto
Tokyo, in the East. Rents in the West reflected the specialization of that region in
cotton growing and textile production. An emerging area of specialization in sericulture during autarky, the East grew to dominate production for export during the era
of open trade. Rather than assume that the market for land was perfectly integrated,
the rent used in the calculations of (6) is the weighted average of rents in the West
per tan) and the East (0.97 ryo
per tan). The weights are each regions
(2.14 ryo
share in the total arable land under cultivation in 1874 reported in Le Gendre (1878,
appendix table).31
III. Empirical Findings
A. Core Results
Tables 2 and 3 provide the core results of the evaluation of the Heckscher-Ohlin
hypothesis (6). Table 2 uses the Japanese technology matrices A JX and A JM to calculate the factor content of exports (panel A), the factor content of imports (panel B),
and the factor content of net imports (panel C) for each factor in each of the 11years.
The five upper rows of each panel show the amount of each factor flow measured
in millions and the final row gives the sum of the autarky valuation of all factor
. The last row in panel A of Table 2 suggests that the autarky
flows in millions of ryo
in 1869 and
value of all factor exports, w a A JX Xk , ranged between 1.79 million ryo
4.81million ryo in 1876. The last row in panel B reveals that the corresponding
autarky values of factor imports, w a A JM Mk , were substantially higher in each single
in 1868 to 16.74 million ryo
in 1875. Since the
year, ranging from 6.76 million ryo
evaluations occur at constant factor prices, the increase in these numbers between
the earlier and later years of the test period suggests a growth in real import and real
export activities. The relatively high value in 1865 reflects the fact that exports of
silk included output from both the current production year and silk that had been
kept off of the international market from the previous year because of the Shoguns
export restrictions.32 Strong results for raw silk and silkworm eggs reflect the lingering impacts of the pbrine crisis, which resulted from a parasite that decimated
European sericulture through the early 1870s. Unusually cold weather in the late
1860s and early 1870s in northeastern Japan also reduced the production of the
31
The sources provide about 136 observations on rents or land values in the Kinai region and 17 observations
region. Most observations are for good or high quality land. The robustness checks discussed later on
in the Kanto
allow us to test for the sensitivity of the results to the observed variation in the autarky price of land.
32
Exports of raw silk in 1865 were more than twice the average for the entire study period.
VOL. 8 NO. 4
69
Table 2Japans Factor Trade Using Domestic Technologies (in millions)

Factor (unit)
Factor
price
(ryo
)
Panel A. Factor exports

Skilled male (days) 0.049
1865
1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
6.06
5.95
5.37
4.25
5.22
8.44
8.00
7.96
8.58
9.02
10.78
0.019
31.09
19.77
27.30
19.32
21.61
35.50
29.79
34.85
34.71
36.62
52.04
Female (days)
0.013
12.67
9.09
11.43
8.70
11.18
16.07
13.87
15.34
17.57
19.48
22.95
1.000
0.81
0.50
0.71
0.50
0.55
0.91
0.73
0.86
0.85
0.92
1.25
Land (tan per year)
1.402
0.67
0.44
0.59
0.42
0.51
0.80
0.68
0.80
0.87
0.89
1.23
2.81
1.91
2.47
1.79
2.08
3.34
2.85
3.26
3.38
3.57
4.81
31.87
31.55
39.55
49.25
44.14
61.90
51.57
Unskilled male
(days)
Capital (ryo
per
year)
w a A JX Xk (ryo
)
Panel B. Factor imports

Unskilled male
(days)
0.019
Female (days)
0.013
Land (tan per year)
1.402
Capital (ryo
per
year)
w a A JM Mk (ryo
)
1.000
Panel C. Net factor imports

Unskilled male
(days)
0.019
58.61
39.17
23.45
24.18
91.54
83.36
52.79
70.59 120.54 115.15
2.37
2.35
1.57
1.84
2.10
1.92
1.11
1.87
3.70
3.23
1.80
2.18
1.92
2.57
2.18
11.61
10.47
6.76
8.30
14.11
13.94
11.74
13.88
13.47
16.74
14.87
2.92
3.05
2.76
3.22
3.08
4.06
3.50
52.54
33.23
18.08
19.93
26.65
23.11
31.55
41.30
35.56
52.88
40.78
60.45
63.59
25.48
51.27
98.92
79.65
60.48
72.13
65.10
93.12
60.13
0.013
1.000
1.56
1.85
0.86
1.34
Land (tan per year)
1.402
1.43
1.48
0.52
1.44
8.80
8.56
4.28
6.52
w a F Jk (ryo
)
99.82 129.74 112.17
127.01 145.99 113.09 100.31 163.35 199.09 214.93 241.60 279.48 273.55 279.74
Female (days)
Capital (ryo
per
year)
90.27 106.98
114.34 136.89 101.66
91.61 152.17 183.02 201.06 226.26 261.91 254.07 256.79

2.37
2.14
2.02
2.35
2.23
3.14
2.25
3.19
2.43
1.11
1.38
1.05
1.68
0.95
12.02
10.59
8.89
10.63
10.09
13.18
10.06
Notes: Factor flows are in the measure indicated. One tan is one-tenth of a hectare. Factor prices are in ryo
averaged
over the period 18501857. At par, one-quarter ryo

equaled 1.33 Mexican silver trade dollars.
Source: For the sources of the A J matrices, trade flows, and factor prices, please see the text and the Data Appendix.
sericulture industry and caused harvest failures. This accounts for the sharp increase
in the factor value of imports between 1869 and 1870.
The autarky value of the factor content of net imports, w a F Jk, is reported on the
bottom row of panel C of Table 2. It is most relevant for testing our hypothesis in
(6). Since it is positive in each testing year, it provides strong support for the prediction in the case of evaluating factor imports with Japanese technologies. The magnitude of the factor flows and the inner products are also economically significant.
With the exception of metal goods, which were produced in isolated locations, most
of the traded goods would have been produced in rural areas by members of farm
families. The net import of unskilled male and female labor in 1876 (320 million
days) would be equal to 6 percent of the estimated 14.8 million rural workers in the
agricultural labor force at the end of the 1870s. The total factor value of net imports
) is equivalent to the annual pay for 1.46 million unskilled
in 1876 (10 million ryo
workers in autarky.
A striking feature of panel C in Table 2 is that the net factor imports are positive
for each of the five factors in each of the 11 years. This implies that the positive sign
70
NOVEMBER 2016
Table 3Japans Factor Trade Using Technologies at the Actual Location of Production
(in millions)
Factor (unit)
Factor
price
(ryo
)
Panel A. Factor exports

0.049
Skilled male (days)
1865
1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
6.06
5.95
5.37
4.25
5.22
8.44
8.00
7.96
8.58
9.02
10.78
0.019
31.09
19.77
27.30
19.32
21.61
35.50
29.79
34.85
34.71
36.62
52.04
Female (days)
0.013
12.67
9.09
11.43
8.70
11.18
16.07
13.87
15.34
17.57
19.48
22.95
1.000
0.81
0.50
0.71
0.50
0.55
0.91
0.73
0.86
0.85
0.92
1.25
Land (tan per year)
1.402
0.67
0.44
0.59
0.42
0.51
0.80
0.68
0.80
0.87
0.89
1.23
2.81
1.91
2.47
1.79
2.08
3.34
2.85
3.26
3.38
3.57
4.81
Unskilled male
(days)
Capital (ryo
per
year)
w a A JX Xk (ryo
)
Panel B. Factor imports

0.049
Skilled male (days)
1.55
2.05
1.84
1.46
1.24
0.99
1.61
1.55
1.39
2.41
1.64
0.019
4.68
9.70
8.30
14.20
20.11
15.08
12.73
13.60
18.19
17.10
16.32
Female (days)
0.013
3.13
6.14
5.53
7.83
11.67
9.55
9.36
9.56
12.53
11.43
11.33
1.000
0.61
0.42
0.27
0.30
0.43
0.44
0.48
0.63
0.51
0.63
0.54
Land (tan per year)
1.402
2.06
2.15
1.53
2.65
4.27
3.79
2.81
2.85
2.38
3.39
2.82
3.70
3.80
2.75
4.46
7.02
6.22
4.87
5.09
4.43
5.98
5.04
Panel C. Net factor imports

0.049 4.51
Skilled male (days)
3.90
3.53
3.98
7.40
6.38
6.41
7.19
6.62
9.15
2.95
0.49
6.52
4.51
5.78
5.04
8.05 11.62
1.39
0.88
Unskilled male
(days)
Capital (ryo
per
year)
w a A ROW
M Mk (ryo)
2.79
0.019 26.41 10.07 19.00
5.11
Female (days)
0.013 9.55
5.90
0.87
0.19
0.12
Land (tan per year)
1.402
1.71
0.94
2.22
3.76
2.99
2.13
2.05
1.89
0.27
2.67
4.93
2.88
2.02
1.83
Unskilled male
(days)
Capital (ryo
per
year)
w a F k (ryo
)
lp
1.000 0.21
0.08
0.43
1.51 20.42 17.06 21.25 16.52 19.52 35.72

0.47
0.26
0.23
0.34
0.29
0.71
1.51
2.50
1.59
1.04
2.41
0.23
Notes: Factor flows are in the measure indicated. One tan is one-tenth of a hectare. Factor prices are in ryo
averaged
over the period 18501857. At par, one-quarter ryo

equaled 1.33 Mexican silver trade dollars.
Source: For the sources of the A lp matrix, trade flows, and factor prices, please see the text and the Data Appendix.
of w a F Jk is robust to variations in factor usage and in factor prices. A second implication is that panel C of Table 2 does not reveal any factor exchange. Recognizing
that this finding could be related to the factor content of imports being calculated
with Japanese technologies rather than with technologies at the location of foreign
production, we turn now to the results in Table 3.
Table 3 presents the results from specifying the factor requirements for traded
goods at the location of actual production: A JX and A ROW
M . Since the factor content
of exports continues to be calculated with Japanese technologies, panel A of Table 3
replicates panel A of Table 2. Panel B of Table 3 reports the factor content of imports
evaluated with technologies at the location of foreign production and the last row
gives the calculations for w aA ROW
M Mk. Comparing the bottom rows of panel B in
Tables 2 and Table 3 reveals that evaluating factor imports with foreign technologies
has now reduced the value of factor imports to between one-third and one-half of the
corresponding values in Table 2. Table 3, panel B reveals that the imports of unskilled
male labor equaledor exceededthe combined total of imported female and
skilled male labor. A striking implication of using foreign technologies to calculate
VOL. 8 NO. 4
71
the factor content of imports is that instead of being a net importer of all factors,
Japan is now revealed as being a net exporter of capital and all three types of labor
(see panel C of Table 3). The one factor that shows an increase over the results presented in Table 2 is land. A comparison of the corresponding input coefficients from
A JM and A ROW
M found in Table 1 suggests that almost all technologies at the location
of production in the rest of the world used more land per unit of output than their
Japanese equivalents. This is not surprising, since Japanese agriculture had one of
the highest ratios of labor to arable land among its trading partners.33 Net imports
of land averaged about 2.1 million tan, or about 4.5 percent of Japans arable land.34
lp
The final row of Table 3 contains the test values of w a F k , which range between
0.23 million ryo in 1876 and 4.93 million ryo in 1870. Despite the much lower vala J
ues of w a A ROW
M Mk relative to w A M Mk , the autarky value of net factor imports still
reveals a positive sign in each of the eleven test years. Our findings provide strong
support for the factor content predictions (6) and are robust to the different technological evaluations of Japans factor content of trade.
Although the sign of the autarky price value of net factor imports is invariant
to which technology matrix is used, the differences in the signs of the net imports
of labor and capital in panel C in Tables 2 and 3 beg for an interpretation. In this
regard, it is helpful to recognize that A JM Mk calculates the counterfactual factor
services that would be required to produce all imports with Japanese (domestic)
technologies whereas A ROW
M Mk calculates the actual foreign factor services required
to produce these imports. Since Japan had not yet adopted the technologies of the
industrial revolution, producing these imports in Japan would have required much
more labor and capital than were actually needed by their foreign trading partners.
Hence, in a world of technological differences using A ROW
M Mk appears to be more
informative about the pattern of international factor trade than A JM Mk. But it is still
quite remarkable that the basic Heckscher-Ohlin prediction (6) still holds even in
the presence of technological differences.
The pattern of factor exchange in panel C of Table 3 reveals that Japan was a net
exporter of labor and capital and a net importer of land. In the context of our theoretical framework one has to be careful to infer that Japan was abundant in labor
and capital and scarce in land because this revealed factor exchange stems from a
complex interaction between technological differences and relative factor scarcities.
Instead, we have provided evidence for Japan being on average a net exporter of its
abundant factors and net importer of its scarce factor, without specifying which specific factor is scarce and which factor is abundant. We should note that our findings
on the importance of imports of land contrast with Yasuba (1996), who argues that
Japans initial reliance on exports of primary products such as silk and tea reflects a
comparative advantage in land-intensive goods.
33
See the observation of Capron (1873, 367) about the labor and resource intensity of Japanese agriculture:
The whole cultivated portion is a garden. The labor to arable land (in hectares) ratio was about 3.1 in Japan in the
late 1870s, 0.72 in Germany in 1883 (including family members), and 0.099 in free trade in Great Britain in 1871.
See Broadberry et al. (2015, ch. 2) and Ohkawa, Johnston, and Kaneda (1969, 11).
34
See Ohkawa, Johnston, and Kaneda (1969, 11).
72
NOVEMBER 2016
B. Evaluation of Robustness
Although the results in Tables 2 and 3 appear to provide unambiguous support for
the autarky-price version of the Heckscher-Ohlin hypothesis, we examine whether
the empirical results are robust with respect to three complications: trade was not
always balanced, land rents differed across Japans core regions, and the micro data
sources used in this study show potential variation in input coefficients and in factor
prices. Because the magnitudes of the inner products in Table 2 are so much higher
than in Table 3 and are also characterized by uniformly positive net factor imports,
we consider the more stringent case and examine robustness only with respect to
lp
wa Fk .
Since Japans trade was not balanced in each of the eleven test years, it violates the fifth condition discussed in Section IIA. The calculations presented
in panel A of Table 4 examine robustness regarding trade imbalances. The top
,
row of panel A includes the ratio of the value of exports to imports, or (___
p t M )k
for each trading year k. Trade deficits occurred in 1867 and over the period 1869
through 1875. During 1865, 1868, and 1876, Japan recorded substantial trade surpluses. Since years with a trade surplus bias the results against our prediction in
(6), they are of minor concern. Years of a trade deficit pose a greater challenge,
since they could bias the results in favor of the prediction. To test for the robustness of our results for the years in which there was a trade deficit, we adjust the
factor services embodied in imports to a level consistent with balanced trade, or
ptX
Mk= (___
t
) Mk. This approach requires us to assume that Japanese preferences
ptX
p M k
are homothetic so that one can scale down imports to evaluate the factor content of
trade at an adjusted import vector that satisfies the balanced trade condition.35 The
lp
lp
lp
corresponding test value in year k is w a F k , where F k = A (M
k Xk). Panel A
of Table 4 presents the net factor imports and the value of the inner product with
the trade imbalance adjustment being made in years of a trade deficit. Hence, the
columns for the trade surplus years of 1865, 1868, and 1876 are the same as the
corresponding columns in panel C of Table 3. The imposition of balanced trade
does not fundamentally change the sign of the inner product; it only slightly modifies the pattern of the factor content of net imports. The bottom line in panel A of
lp
Table 4 does depict a relative decline in the magnitude of w a F k in all deficit years.
However, the inner product remains positive in all years including 1870, the year in
which the economy experienced the largest trade deficit.
The remaining results in Table 4 also highlight the sensitivity of the overall
results to the autarky rental price of land. As noted above, the autarky price of land
was higher in western Japan than in eastern Japan. Since most of the exports of the
sericulture industry originated from eastern Japan and imports of cotton textiles
competed with products produced in western Japan, we examined the impacts of
valuing land according to regional specialization. Panels B and C of Table 4 assign
35
The adjustment uses the values of exports and imports for which it is possible to measure the factor trade
(about 97 percent of exports and 84 percent of imports).
VOL. 8 NO. 4
73
Table 4Robustness Checks for the Test of the Heckscher-Ohlin Theorem (in millions)
1865
1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
Panel A. Adjusting for trade imbalances (net factor imports and inner product)
ptX
_
( p t M )k
Skilled male (days)

Unskilled male
(days)
Female (days)
*
4.51
0.77
4.37
*
3.53
26.41 12.28 19.00

9.55
Capital (ryo
per year) 0.21
4.35
5.90
0.70
0.47
0.94
0.76
0.81
0.88
0.75
3.23
4.64
7.46
6.77
6.70
7.35
7.22
*
9.15
9.44 12.25 21.27 20.16 23.84 18.66 23.78 35.72

3.25
5.74
7.06
6.79
7.60
6.52 10.90 11.62
0.18
0.43
0.29
0.35
0.50
0.37
0.35
0.40
0.45
0.71
1.02
0.27
1.32
1.18
2.53
0.84
0.87
0.52
0.92
0.23
Panel
_ lp B. Using region-specific land rent (inner product)
0.61
1.67
0.46
2.42
wa F
k (ryo)
4.42
2.63
2.53
2.28
1.96
2.95
1.27
1.29
1.37
1.42
1.27
Land (tan per year)
k (ryo)
wa F
lp
1.39
0.88
1.22
0.94
1.42
1.48
2.78
1.45
Panel
_ lp C. Adjusting for trade imbalances and using region-specific land rent (inner product)
0.61
0.90
0.46
1.19
1.06
2.31
1.30
wa F
k (ryo)
1.51
1.23
1.66
1.59
Notes: _Years with a * in the first row were years with a trade surplus. In panels B and C, the vector of factor
region in eastern Japan (0.97 ryo
) for all goods with the excepprices w a includes the average rent for the Kanto
tion of raw cotton and cotton goods, for which the factor price of land is the average rent in the Kansai region of
).
western Japan (2.14 ryo
Source: For a discussion of the procedures used to adjust for trade imbalances and sensitivity of the results to the
price of land, please see the text.
the autarky rent of eastern Japan to the factor content of all traded goods except
for raw cotton, cotton yarn, and cotton cloth for which the autarky rent of western
Japan would be appropriate. While panel B reports the values of the inner product
using region-specific land rents without trade balance adjustments, panel C gives
the results both with region-specific land rents and with adjustments of trade imbalances. Although some of the values in panels B and C of Table 4 are smaller than
the corresponding benchmark values in panel C of Table 3, they continue to remain
positive in all years. The results are also robust to differences in land rents across
economic regions.
A final concern is whether our choices about the measurement of the input requirements used in the benchmark technology matrix A lp = (A JX, A ROW
M ) and our use of
average values for the benchmark vector of autarky factor prices w a substantially
influence the conclusions derived from Table 3.36 In order to measure the per unit
factor requirements of traded goods, studies using data from contemporary economies rely upon well-known databases for employment by two-digit industry and
input-output tables for calculations of factor requirements for intermediate goods.
Various methods are used to calculate capital usage by industry. Output is measured
by value.37 To calculate the relevant A matrices, the researcher must make choices
about how to aggregate labor, how to calculate and measure capital usage and how
to adjust value measures of output to real values that are consistent across countries.
By contrast, the A matrices used in this studyboth for direct factor usage and
indirect factor usagewere all constructed from micro-based historical sources that
36
37
We are grateful to an anonymous referee and the editor for their comments and suggestions on this issue.
Well-known examples are Davis and Weinstein (2001) and Choi and Krishna (2004).
74
NOVEMBER 2016
described quantities of factors required to produce specific final products and the
intermediate products used in the production of that product. This approach captures the actual substantial variation in factor usage by product that is so apparent in
Table 1. Our approach also allows us to capture the distinctive factor usage requirements of Japans main exports.38 A potential disadvantage of our approach is that the
historical sources, which are discussed in detail in Bernhofen, Brown, and Tanimoto
(2014), sometimes provide multiple estimates of direct and indirect factor usage and
alternative estimates of key input-output relationships. The benchmark input coefficients that underlie the calculations in Table 3 relied upon averages of the available data combined with information from historical sources about which estimates
would be most relevant for understanding Japans trading relationships.39 To test
the robustness of our results to observed variations in the underlying historical data,
we focused on twelve key products where the choices we made calculating input
coefficients could be expected to have the strongest influence on the outcome of the
test.40 Since all of these products involved processing of agricultural raw materials,
it is not surprising that land constituted the largest share of the value of factor usage
at autarky factor prices for imports and from one-third to two-fifths of factor usage
for exports. Input-output relationships meant that variations in the measured use of
land for intermediate goods could have a substantial impact on total factor usage.41
In addition, the production of reeled raw silk required two intermediate products
mulberry leaves to feed silkworms and silk cocoons to be reeledwhere variation in
the input-output relationships could matter substantially. Our assessment of robustness calculated the influence of the variation we observe in our source data for the
A matrices and the variation in factor prices on the distribution of the inner product.
Both considerations of input-output relationships in sericulture and land usage
matrices, which we
overall informed our calculation of alternative A JX and A ROW
M
ROW
. For A XJ , alternative values of all input coefficients were
denote by A XJ and A M
calculated based upon three alternative values for each of two key input-output relationships in sericulture, the amount of land required per kilogram of mulberry leaves
and the amount of land required per kilogram of refined tea. The three alternatives
included the benchmark estimates, a high value drawn from the observed distribution in the data at the third quartile, and a low value drawn from the observed
distribution at the first quartile. The A XJ thus includes a total of 27 possible permutations of the input requirements for sericulture and three permutations for tea.
ROW
also includes the benchmark estimate and high and low values of land
A M
usage for three groupings of products: woolens, cotton yarn and cloth, and rice,
38
For example, raising silkworms is subsumed under ISIC Rev.4 category 014 (United Nations Department of
Economic Social Affairs Statistics Division 2008), which spans products from raising cattle to raising bees. See
also Appendix Table A1.
39
For example, since the export sector of Japans silk industry was concentrated in a small number of prefectures, it was appropriate to weight the data on technologies in the industry using prefectural measures of their
contribution to total production.
40
The products included the main exports and imports. Exports included raw silk, silkworm eggs, and tea.
Imports included rice, brown sugar, white sugar, cotton yarn, shirtings, and four woolen cloths: camlets, woolen
blankets, mousseline de laine, and mixed light worsteds such as Orleans.
41
For example, every pound of yarn produced using Indian cotton required four pounds of seed (unginned)
cotton from the field.
VOL. 8 NO. 4
75
ROW
brown sugar and white sugar. A M
thus has 27 permutations of input coefficients.42
Since the rich data sources available for the Japanese economy in late autarky provide several quotes on the autarky valuation of various types of labor, interest rates
(which were used in the calculation of the rental price of capital), and the rent on
land in both East and West Japan, we also assessed the contribution of potential
variations in w a to the variations in the value of the inner product.
For each year, the sampling procedure randomly drew one of the possible perROW
, and a vector of factor
mutations of A XJ , one of the possible permutations of A M
prices.43 These randomly drawn values were used to calculate the inner product
lp
w a F k for year k. The procedure essentially assumes that the alternative input coefficient matrices were uniformly distributed. The procedure was repeated 10,000 times
for each trading year and also incorporated the three additional robustness adjustments featured in Table 4.
lp
Figure 1 shows the complete distributions of w a F k resulting from the simulation exercises for the case of balanced trade with regional land markets. Figure 1
reveals that the mass of each distribution lies to the right of 0 for each single year,
including the years 1865, 1868, and 1876, when the inner products take the lowest
values across all specifications. Table 5 presents the proportion of times that the
lp
calculated w a F k (the hypothesis presented in equation (6)) takes on a positive value
for each year and over all calendar years. The table includes the results for the base
case featured in Table 3 in the second row and the three alternatives from Table 4
in rows three through five. The proportion of times that the result is consistent with
the hypothesis varies from 0.58 under the assumption of regionally-differentiated
rents on land in 1876, a year with an export surplus, to 0.95 or higher one-half
of the time. In all four cases, the proportion of times that the simulated values of
lp
w a F k are consistent with the hypothesis for all trading years is greater than 0.8. Our
preferred specification is in the last row of Table 5, since it includes an adjustment
for balanced trade and values land at rents that most likely reflect the opportunity
cost during autarky. In that case, our uncertainty about measurements leads us not to
reject the Heckscher-Ohlin hypothesis 90 percent of the time.
IV. Concluding Remarks
The Heckscher-Ohlin theorem is one of the central general equilibrium propositions in economics. It predicts that the direction of trade is explained by differences
in countries relative factor scarcity. In Bertil Ohlins (1933) original formulation,
relative factor scarcity is measured by countries autarky factor prices. A long line
of research that applies comparative statics methodology to international trade has
shown that Ohlins (1933) conjecture on the relationship between autarky factor prices and the pattern of international trade can be formulated as a refutable
hypothesis. This was initially accomplished for the two-country, two-factor,
42
The Data Appendix discusses the sources of potential variation of land usage in imports and documents the
ROW
amount of variation found in A XJ and A M
.
43
The sampling procedure randomly drew one each of 5 possible skilled male wages, 28 possible unskilled
male wages, 24 possible female wages, 20 possible prices of capital (based upon variations in the interest rate), 136
possible land rents for western Japan, and 17 possible land rents for eastern Japan.
76
NOVEMBER 2016
1865
1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
All years
0.6
0.4
0.2
0
Density
0.6
0.4
0.2
0
0.6
0.4
0.2
0
10
10
10
10
w aF lp (in millions)
Figure 1. Distributions of w a F lp from Drawings of Input Coefficients and Factor Prices with
Adjustments for Balanced Trade and Region-Specific Rents on Land
Notes: For the procedures used to generate the distributions depicted in the figures, please see the text. The 0.8 per are not included in the histograms.
cent of the cases for which the simulated value of w a F lp exceeded 10 million ryo
a lp
Source: Results of 10,000 simulations of the value of w F (in millions of ryo ) for each trade year
Table 5The Proportion of Times That the Simulations Yield a Positive w a F lp in Each Trade Year
Case
1865
1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
All
years
Benchmark
0.72
1.00
0.66
1.00
1.00
0.99
0.99
0.97
0.89
0.98
0.58
0.89
Balanced trade
0.72
0.97
0.66
0.99
0.92
0.97
0.82
0.81
0.72
0.77
0.58
0.81
Regional rent
0.66
1.00
0.79
1.00
1.00
0.99
1.00
1.00
0.99
1.00
0.85
0.93
Regional rent and

balanced trade
0.66
0.95
0.79
0.98
0.92
0.98
0.95
0.94
0.95
0.92
0.85
0.90
Note: For a discussion of the procedure used to conduct the robustness simulations, please see the text.
lp
Source: Results of Monte Carlo simulations of the empirical distribution of w a F k
two-commodity world familiar from undergraduate textbooks in international trade.

Subsequent research by Deardorff (1982) and Neary and Schweinberger (1986) has
formulated a refutable Heckscher-Ohlin proposition for a single economy that holds
under general conditions regarding dimensionality and assumptions about the economys trading partners.
We argue that Japans economy before and after its nineteenth century move from
autarky to free trade conformed to the critical assumptions of this autarky price
formulation of Heckscher-Ohlin. The historical sources allowed us to construct
technology matrices based on disaggregated data of input requirements for traded
VOL. 8 NO. 4
77
goods at the location of production. Combining these data with matching commodity trade flows and autarky factor prices enabled us to test the general validity of the
Heckscher-Ohlin hypothesis. We were not able to reject the hypothesis in any of the
sample years. This is certainly good news for the neoclassical trade model and for
those who have contributed to its formulation since Ohlin.
Data Appendix
This study uses datasets on trade (T), technology (A matrices), and autarky factor
prices (w a) that were assembled for the project Empirical Tests of Neo-Classical
Trade Theory Using a Natural Experiment: The Case of Japan.44 In our development of the trade and technology datasets, we took note of three key measurement issues articulated in Maskus (1991). First, the data must be consistent with the
economic framework. Second, the aggregation of trade and production data should
minimize differences in factor use within product categories. Finally, the measurement of factors should be consistent across trading partners.45 The data developed
for the project and used in this study were designed to address these concerns.
The theoretical model implies a restriction on the inner product of autarky factor
prices and the factor trade vector (in quantity terms). Ideally, the calculated factor
content of trade should include all relevant factors used in the production of all
tradable products. Contemporary studies using modern trade and technology data
can sometimes hit the mark on complete coverage of traded goods by aggregating all nonmanufactures into one category, but at a considerable cost in terms of
the second criterion: minimizing aggregation bias.46 The reasons are well-known.
Cross-national data on the use of inputs in production and input-output matrices are
at best available at a two-digit level of aggregation.47
The product detail in Japanese trade statistics, the wealth of historical data available on production technologies, and the relatively narrow range of traded products led us to focus on developing highly-disaggregated T and A matrices based
on clearly defined products or closely-related product groups.48 Detailed trade
data from 1868 onwards are from the compilation of Meiji-era trade data found
in Bureau of Customs (1893). Consular reports for Great Britain, the German
states, and Belgium provide coverage for 1865 and 1867 and help fill in gaps in the
Meiji trade data.49 Table A1 provides a comprehensive list of the 20 exported and
44
Bernhofen, Brown, and Tanimoto (2014), which is available from the authors, provides a complete description of the over 250 data sources used to construct the A matrices.
45
See Maskus (1991, 2627) on economic relevance and optimal aggregation and Davis and Weinstein (2003)
on consistent measures of factor quality.
46
Often studies focus only on manufactures. Choi and Krishna (2004), for example, note that bilateral data for
nonmanufacturing industries were not available for their test. Findlay and ORourke (2007) emphasize the extent
to which North-South trade depended upon the exchange of foodstuffs and raw materials for manufactured goods.
47
For example, the ISIC Rev.4 includes 20 manufacturing industries and one for crop and animal production,
hunting, and related service activities.
48
The technology matrix incorporates indirect and direct factor usage as in Trefler and Zhu (2010).
49
Further detail on traded goods is found in the consular reports of Belgium, France, Germany, and Great
Britain, which drew upon the respective chambers of commerce and western merchants for more information.
Reports of trade delegations from Switzerland, Prussia, and Austria-Hungary provided additional information on
the characteristics of traded goods. See von Scherzer (1872), Brennwald (1865), and Jacob (1861).
78
NOVEMBER 2016
Table A1Products in the T vector for Japan: 18651876
Exports
Share
of total
ISICI
Rev.4
code
Imports
Country or
countries
of origin
Share
of total
ISIC
Rev.4
code
Raw silk
41.15
01
Silkworm eggs
11.01
01
Rice
Cochin-China
8.20
01
Soy beans
China
1.12
3.13
01
01
White sugar
Formosa
2.85
01
Green tea
23.61
Bancha tea
0.43
01
Brown sugar
Formosa
6.62
01
01
Indigo
India
0.03
Rice
01
0.44
01
Kerosene
United States
0.74
06 & 19
Tobacco
0.62
01
Pig iron
Great Britain
0.09
24
Shiitake mushrooms
1.10
01
Bar iron, rod iron, iron

manufactures, nails
Great Britain and

Belgium
2.27
24
Dried seaweed
2.02
01
Steel
Great Britain
0.05
24
Dried cut seaweed
0.43
01
Lead
Great Britain
0.55
24
Agar-agar (kanten)
0.59
01
Tin
Great Britain
0.13
24
Dried cuttlefish (surume ika)
1.23
03 & 10
Raw cotton
China
2.12
01
Dried sea cucumber (iriko)
0.68
03 & 10
Cotton yarn
Great Britain
13.96
13
Dried abalone (awabi)
0.41
03 & 10
Great Britain
11.39
13
Raw cotton
0.04
01
Shirtings (cotton cloth)
Finished and other

unfinished cotton clothb
Great Britain
8.35
13
Camphor
0.67
01
Woolen and worsted cloth,

blanketsc
France, Germany,
Great Britain
21.14
13
Vegetable wax (Japan wax)
0.97
01
Weapons
Great Britain
1.91
25
Copper
2.27
07 & 24
Ammunition
Great Britain
0.55
25
Coal
2.28
05
Sulphur
0.09
08
Other silk productsa
Total
93.19
81.60
Pierced and dupioni cocoons, noshi silk, floss silk, and waste silk are treated as joint products.
Composed of five subcategories grouped on the basis of weight, count of yarn, and finishing. The categories are
encompassed in HS codes 5208.11.20, 5801.35, 5208.12, 5308.22.40, 5208.31.40, and 5208.51.40.
c
Composed of 11 subcategories that would be encompassed in HS codes 5111.11, 5111.90, 5112.19, 5112.90,
and 6301.20 but with three different countries of origin.
Source: Bureau of Customs (1893) and the Harmonized Commodity System and Coding System used for United
States Tariffs (found at http://hts.usitc.gov/)
b
18 imported products and product groups that are included in the A matrices.50 Note
that finished cotton and woolen textiles are further broken down into 16 separate
product groups, each of which reflects the country of origin of the cloth, the construction (weight, count of yarns) and origin of the raw material. As is readily apparent, use of a two-digit classification would lump together 82.4 percent of Japans
exports into one category (ISIC rev.4 code 01) and 54.8 percent of its imports into
another (ISIC rev.4 code 13, Textiles). The cost of our product-based approach is
modest on the export side and only a bit higher on the import side. Only 5 percent
of exports are excluded from our analysis; we lack data on technologies used for
19percent of Japans imports.51
50
Bernhofen, Brown, and Tanimoto (2014) provides a comprehensive account of the sources and procedures
used to develop the A matrices for the Empirical Tests of Neo-Classical Trade Theory Using a Natural Experiment:
The Case of Japan project.
51
The largest missing product among exports is miscellaneous exports (1.1 percent of value). The next nine
products account for 3.4 percent of value. The top missing import category is miscellaneous imports, which
VOL. 8 NO. 4
79
The main country of origin for each import can also be identified from the consular
reports of Japans western trading partners and other contemporary commentaries.52
Bernhofen, Brown, and Tanimoto (2014) document the products that appear in the
trade data and the more than 250 sources that we used to develop the A matrices. All
factor amounts can be measured per unit of physical output.53
Consistent with historical descriptions, the A matrices were constructed with
five factors: three categories of labor (skilled male labor, unskilled male labor, and
female labor), capital, and land.54 Since most sources provide data disaggregated by
production process or task, it is possible to calculate factor usage per unit of output.55
Sources generally refer to the gender of workers. The distinction between skilled
and unskilled workers was made on the basis of occupational titles and where necessary, on wages paid. Labor is measured in terms of days of work per unit of physical
output.56 It is not possible to directly compare the quality of Japanese and European
labor, but data on wages calculated in grams of silver circa 1855 suggest a ratio of
Japanese to British farm labor pay of about 0.5, which is about the same or smaller
than differences in wages (and productivity) among higher-income European and
American trading partners in the early 1990s identified in Clague (1991).57
The measurement of capital was based on the annual user cost of capital as defined
in OECD (2009, 65): co = P o(r + ), where co is the capital cost of production; P o
is the price of the capital (including the construction cost of buildings as well as
machinery or tools); r is the relevant interest rate; and is the rate of depreciation.
In the A matrices, the amount of capital used in production (co) is expressed per unit
of output. Virtually all of the Japanese sources provide P o . Where this information
is lacking, a depreciation rate of 30 percent is assumed for wooden capital such as
and Settsu (2006) review the literature on interest rates in late autarky
tools.58 Saito
Japan and suggest that 10 to 12 percent would be reasonable. Western sources usually list P o and separately for buildings and for machinery; most sources also
accounts for 2 percent. The next nine products account for 4.5 percent of the value of imports. Two imports not
included in the matrix for Japanese production of importables (the A JM) are weapons (rifles) and ammunition. These
two products were included in the A ROW
M matrix, or the matrix of coefficients defined by the technology used at the
location of production. Aside from gray shirtings (the largest import of cotton cloth), which were accorded a separate category of cotton cloth, the other cotton cloth imports were grouped into four categories by weight of the cloth,
yarn used, and finish. Imports of woolen and worsted cloth were grouped into eleven categories by country of origin
(Germany, France, or Britain), type of yarn (worsted, woolen, or mixed cotton and woolen) and weight of the cloth.
52
See footnote 49 for the countries supplying either consular reports or the reports of trade missions.
53
For example, ample information on the dimensions of traded cloth found in the consular reports and contemporary accounts permitted precise calculation of the square yardage of traded cloths and their respective weights.
54
In the circumstances where the sources reference the employment of boys, they are assigned to female labor.
See Rosenberg, Wallis, and Whitworth (1969) for well-known differences in American and British use of skilled
versus unskilled labor.
55
See below for the treatment of factor usage in intermediate goods.
56
The days of labor were almost always reported in Japanese sources and many of the main sources for western
technologies, including Wright (1891,1892). In the absence of this information, the work year was assumed to have
about 300 days for Europe and Japan (see Huberman and Minns 2007).
57
See Allen et al. (2011) and Bassino and Ma (2005) for the real wages of building laborers in Kyoto relative
to London, Leipzig, and Milan. The comparison for 1991 is between Ireland, Italy, Spain, United Kingdom, Japan
and Austria; and the Netherlands, Belgium, France, Luxembourg, Denmark, Germany, and the United States for
unskilled blue collar wages.
58
See Hokusuikyo
kai (1935) for an average depreciation of various wooden tools of about 30 percent.
80
NOVEMBER 2016
provide information on r, which was in the 3 to 5 percent range in the west. Capital
of 18541857.59
is measured in terms of gold ryo
Our treatment of land distinguishes among paddy land (irrigated fields suitable
for flooding to produce rice), arable land used for other crops (known as dry fields
in Japan), and pasture.60 All arable land (east and west) is assumed to be dryfields
except for paddy land. All land is measured in terms of tan, a measure of area equivalent to one-tenth of a hectare or one-quarter of an acre, per unit of output. We converted measures of pastureland, which was used in the raising of sheep, to an arable
land equivalent using the following procedure. We identified the mix of arable and
pasture land for the major suppliers of wool to the European woolen and worsted
industry.61 As column 3 of Appendix Table A2 indicates, the extremes ranged from
exclusive reliance on arable land (the French approach, which relied upon stall feeding of sheep) to the extensive methods of the southern hemisphere (Australia and
Argentina), which relied entirely upon pastureland. Information on the relative rents
and the mix of arable and pasture land were used to convert the raw data on land
used for wool production into dryfield (or arable) land equivalent acres using the
following formula:
(A1)
Acres + (1 ) _
Acres _
Rent Pasture ,
Acres/sheep Dryfield = _
Sheep
Sheep Rent Arable
where is the share of arable (or crop) land in the total acreage per sheep.62 The
necessary data and sources for this calculation are reported in columns 3 through 5
of Table A2. The rent for arable and pasture land in Great Britain (216 and 90 pence,
respectively) is used in the right hand side of (A1) to calculate the dryfield equivalent of pastureland in Great Britain, Australia, and Argentina, since Great Britain
was the only European country producing wool that also practiced free trade in agriculture. Column 6 contains the resulting dryfield equivalent.63 The result is that the
land coefficient for European wool was several times the coefficient for producers
in the southern hemisphere.
Additional brief information follows on the procedures and sources used to construct the benchmark A matrices (A JX, A JM, and A ROW
M ) and the benchmark vector of
autarky prices w a.
I. Benchmark A JX and A JM Matrices
In order to calculate total factor requirements per unit of output, construction

of the A matrices involved identification of the most important input-output relationships and then identifying sources that could provide data on the direct factor
The index of non-tradeable goods found in Shinbo (1978, tables 510) and the contemporaneous exchange
rate from Schneider et. al. (1991) were used to convert values in yen or other currencies into gold ryo
of 18541857.
60
Trefler (1993) provides an early example of explicitly recognizing differences between arable and pasture
land.
61
The data refer to the production of merino or other long-staple wools.
62
The only assumption is that arable land was otherwise roughly similar in quality across Japans trading
partners.
63
Senkel (1901) describes the international market for wool during this period.
59
VOL. 8 NO. 4
81
Table A2Standardizing the Type of Land Used in Wool Production

Wool
producer
(1)
France
Germany
Great Britain
Argentina
Australia
Acres
per sheep
(2)
Share of
cropland
(3)
Pence per acre

of cropland
(4)
Pence per acre

of pasture
(5)
Acres per sheep:

Dryfield equivalent
(6)
0.57
0.22
0.60
0.57
2.50
100
85
33
0
0
216
216
216
N/A
N/A
NA
16
90
23
5
0.57
0.19
0.37
0.06
0.06
Notes: The acres per sheep in column 2 include both cropland and pasture. Note that British rents are used since
alone among the three European producers of wool in the table, Great Britain practiced free trade in agriculture.
Since Argentina and Australia used only pasture for raising sheep, rents on cropland are not relevant for the calculation. For France, rents on pasture are not relevant since French methods of raising sheep used primarily stall feeding. For an explanation of the calculation of a dryfield equivalent, please see the text.
Source: For columns 2 and 3: Sanson (1878, 124) adjusted for a full year for France; Wrightson (1898, 195203)
for Great Britain; and Mendelson (1904, 13031) for Germany. Gibson (1893, 102) provides the acres per sheep for
second-class land in Argentina, and Griffin (1890, 25256) offers an average for Victoria and New South Wales.
For column 4: rents on British farmland are from Turner, Beckett, and Afton (1997, Fig. 9.8). For column 5: average of range presented in United States. United States Tariff Board (1912, 450 in Volume 1) for British sheep farms.
For Germany, the source is Meitzen (1869, 296).
usage for each final and intermediate good. The primary Japanese source for the
ji Cho
sa,
resource requirements for silk, tea, and other agricultural products is the No
a 27-volume study commissioned by the Meiji government in the mid-1880s that
recorded in minute detail input requirements for most of agriculture.64 This study
used the data from this source for ten final products and the intermediate goods mulberry leaves, silkworm eggs, and cocoons. Data at the prefectural or sub-prefectural
level (gun) are available from 20 of the 43 relevant prefectures. Additional sources
provided information on resources required to further process agricultural raw materials into final products such as indigo dye, muscovado and white sugar, rapeseed
oil, and tea. The calculations of the factor requirements for the remaining products
in the A J matrices drew upon contemporary accounts and modern studies of technology. Lyman (1879) is a key source for metallurgy and mining. Where multiple
values of factor coefficients or input-output relationships were observed (for example, from multiple prefectures in Japan), a weighted average was used. The weights
are the importance of the prefecture in production circa 1874.
Finally, the A JM matrix includes entries for three Japanese silk clothshabutae,
chirimen, and hakata obifor which imports of woolen and worsted cloths served
as substitutes. A research note available from the authors details the approach used
to map the many kinds of woolen and worsted imports into these three silk cloth
equivalents (see Brown 2015).65 The note also describes how the large number of
We used this edition: Cho

, Sho
da, and Ohashi (1979).
See Tamura (2001) for the most detailed discussion of woolens in the Japanese market including data from a
Japanese yarn and cloth merchant. The reports of the consulates and trade missions noted in footnote 49 were valuable in augmenting the studies of the Japanese market for woolens and allocating imports to the proper categories.
Rondot (1847), Mitchell (1869), and United States Tariff Board (1912) provide detail on the weight and structure
of both woolen and worsted cloth.
64
65
82
NOVEMBER 2016
cotton and woolen textile products listed in the Meiji trade statistics were mapped
into five categories of cotton cloth and eleven groups of woolen and worsted cloths.
II. Benchmark A ROW
M Matrix
Calculating the factor requirements at the location of production for the imports
listed in Table A1 used about 150 sources. The studies of comparative productivity
published in Wright (1891, 1892) are the most valuable sources for British metals and
textiles. The report on German exhibitors at the 1867 Paris Exposition and French
and German parliamentary inquests provide more information on their respective
woolen and worsted industries.66 The monumental studies by John Lossing Buck of
Chinese agriculture provide enough detail to allow an assessment of resource needs
for farms that marketed a substantial share of their soybean and cotton crops (see
Buck 1930, 1935, 1937). Coquerel (1911) documents the production characteristics
of Cochin-China (southern Vietnamese) rice agriculture and Isett (1995) provides
an account of the Formosan sugar industry.
Finally, Japans western trading partners produced raw materials such as iron,
tin, and lead ore, wool and coal domestically, along with other intermediate goods
such as pig iron, worsted and woolen yarns, and unfinished cloths. The sources
that provided final factor usage often included accounts of these domestic intermediate goods producers.67 The factor requirements of these goods were included
submatrix. Other intermediates were
in the total input requirements in the A ROW
M
traded goods and were for the most part raw materials. Historical sources provide
ample evidence on total factor usage. They included cotton (India and the United
States), indigo dye (India), wool (Australia and Argentina), and timber for British
coal mines (Sweden).68
III. Benchmark Vector of Autarky Factor Prices w a
.69
Autarky prices for capital, labor, and land are expressed in terms of gold ryo
Capital is treated as the numraire priced at one gold ryo . Virtually all production
of tradeable goods took place in rural locations or small towns, so that wages outside of the major urban centers of Osaka, Kyoto, and Edo (Tokyo) are appropriate.
and other historians amply documents primary sources for
The research of Saito
1973, Saito
1998,
autarky wage rates for unskilled men and for women (see Saito
and Yamazaki 1961). Suzuki (1990) is a well-known source for skilled wages.
66
See Dentu (1867); Le Parlement franais (1870); and Reichs-Enquete fr die Baumwollen- und
Leinen-industrie (1878).
67
See, for example, the studies published in the early 1890s by Wright (1891, 1892).
68
During the nineteenth century, the only appreciable trade in manufactured intermediate goods that would
matter for the hypothesis test was the use of British cotton yarn in the manufacture of some German woolen or
worsted fabrics. This was accounted for. Kenworthy (1865) and Griffin (1890) provide discussions of the Australian
wool industry.
69
All factor prices from the western part of the country, which included the Kinai region in the area of Osaka
and Kyoto, used a silver-based
currency (the silver monme). The monthly exchange rates of the monme with the
ryo found in Miyamoto and Osaka University (1963) are used to convert these values to ryo
.
VOL. 8 NO. 4
83
)
Table A3Factor Price Data for Autarky Japan (in r yo
Factor
Skilled male labor (per day)
Unskilled male labor (per day)
Female labor (per day)
Capital (numraire)
Land (Kinai) (per tan)
) (per tan)
Land (Kanto
0.049
0.019
0.013
0.999
2.14
0.97
SD (w)
0.020
0.007
0.004
0.018
1.038
1.309
Observations
5
28
24
20
136
17
Notes: A tan is about one-tenth of a hectare. Variation in the price of capital arises from variation in interest rate series.
Source: For a discussion of main sources for the factor price data, please see the text.
Land quality and prices varied across Japan.70 Data on land rents and values
during the late autarky period are most readily available for locations in the produc,
tive heartlands of autarky Japan, the Kinai (several villages), and from the Kanto
both of which were silk-growing areas (Gunma prefecture and Ashikaga County).71
Although Tokugawa authorities did not allow for the sale of land in the sense of the
twenty-first century, active markets in pawning and mortgaging land provide data
on land values, which were converted to rents using the standard conversion factor
of 0.096 times the price.72 Since most land in the sources was of medium or high
were used in the
quality, simple averages calculated for the Kinai and the Kanto
paper. More elaborate approaches using hedonic regressions would yield similar
results. Appendix Table A3 presents the mean, standard deviation and number of
observations for each factor price. The coefficient of variation of all factor prices
is at or below one-half.
except for land rents in Kanto
ROW
IV. Alternative A XJ and A M
Matrices Used in the Simulations
The benchmark A JX and the A ROW

M matrices used in Table 3 were constructed using
a wide range of micro-based, product-specific data on technologies. For example,
the benchmark estimates of input requirements for silk and silkworm eggs are
weighted averages of prefectural or sub-prefectural (gun) averages of the data found
ji Cho
sa. Since only a few prefectures specialized in the export of silk and
in the No
silkworm eggs, the use of weighted averages ensured that the data from the main
exporting prefectures would have the most influence on the benchmark estimates.73
matrices followed a simCalculation of the other elements of the A JX and the A ROW
M
ilar procedure by drawing upon information from as many contemporary sources
and historical accounts as possible. As the text indicates, our approach to testing
the robustness of the results reported in Table 3 to the variation observable in our
ROW
, which included
sources was to create a set of alternative A matrices, A XJ and A M
70
Japanese tax authorities classified all plots of land into four categories: very low quality, low quality, medium
or standard quality, and high quality. Land was also classified as paddy land or dryfield land.
71
See Fuse Shi-shi Hensan-iinkai (1967, tables 28 and 65) and Takeyasu (1968, table I-27) for the records of
several villages in the vicinity of present-day Osaka. Arakawa (1907) provides the data on land prices in Ashikaga
County and Gunma Kenshi Hensan Iinkai (1988, 36877) provides data on land sales in the Gunma prefecture.
72
See Saito
(2009, 171).
73
de Bavier (1874) provides a detailed account of the areas specializing in exports of silk; and Le Gendre
(1878) provides data from the first Meiji census of production.
84
NOVEMBER 2016
Table A4The Importance of Land Input Coefficients (Alandj) for the Autarky Valuation of Factor
Imports
Import( j)
Orleans and lustres
(mixed light worsteds)
Camlets
Source
country
Share of
w a A lp M
Share of land
in unit value
of product
Source of
parameter
variation
Great Britain
0.069
0.62
Great Britain
0.075
0.79
source of wool
supply
source of wool
supply
source of wool
supply
source of wool
supply
cotton yield
variation in India
and the United
States
cotton yield
variation in the
United States
yield of rice paddy
in Cochin-China
and China
land usage in
Formosa
land usage in
Formosa
Mousseline de laine
(wool muslin)
Woolen blankets
France
0.075
0.88
Great Britain
0.069
0.98
Cotton yarn
Great Britain
0.175
0.82
Gray shirtings
Great Britain
0.083
0.75
Rice
Cochin-China
0.130
0.82
Brown sugar
Formosa
0.033
0.93
White sugar
Formosa
0.019
0.71
0.73
0.59
Share of total autarky

valuation of factor imports
Ratio:
low {a }
high {alandj}
landj
_
0.26
0.24
0.38
0.23
0.46
0.84
0.21
0.50
0.50
Note: Mixed light worsted cloths used a mixture of cotton yarn and hard-spun worsted yarn.
Source: For a discussion of the sources on individual parameter variation, please see the text.
three choices of the coefficient in question for the products that contributed the
most to the value of the inner product. The three choices included a high estimate,
the benchmark estimate, and a low estimate. We simulated the distribution of
values of the inner product that would result under the assumption that all possible
permutations embodied in the alternative matrices were uniformly distributed. The
simulation randomly selected one of the permutations of the A XJ matrix, one of the
ROW
matrix and one element each from the vector of factor
permutations of the A M
prices. The procedure was replicated 10,000 times. We used the results to calculate
the resulting distributions of the inner product for each trade year.
ROW
and A XJ matrices followed
The procedure used to construct the alternative A M
three steps. The first step was to identify the products and factors of production for
which a plausible range of variation in the key input coefficients of the benchmark A
matrices may have mattered the most for the value of the inner product. As Table A4
suggests, the factor of production that mattered the most for the autarky valuation of
factor imports would have been land. Only nine products (four woolen cloths, two
products of the cotton textile industry, rice, and brown and white sugar) accounted
for three-quarters of the autarky valuation of imports overall; the autarky value of
land made up almost 80 percent of that amount.
VOL. 8 NO. 4
85
The second step was identifying the potential range of variation in land use for
these products. For woolens and worsted cloths, the main potential source of variation in factor usage was the extent to which the wool was produced domestically
(in Great Britain, France, or Germany) or imported from the producers located in
the regions of recent settlement in the southern hemisphere. For Great Britain, the
alternative source was primarily Australia, New Zealand, and to a lesser extent South
Africa. For France, the alternative source for the merino wool used in the production of mousseline de laine was Argentina, Uruguay, or Australia. For Germany, the
matrix used
alternative source was Argentina or Uruguay.74 The benchmark A ROW
M
contemporary evidence on the mix of raw wool from domestic (European) sources
and the southern hemisphere to estimate the benchmark land input coefficients [alandj]
for woolen and worsted cloths. The high estimate for the four woolen cloths
assumed that only domestically-produced European wool was used. The low estimate assumed that wool was produced in the southern hemisphere. For producers of
Formosan brown and white sugar and Cochin-Chinese rice, the sources included the
range of land productivities listed in the sources.75 These supplied the high and
low estimates for the three alternative submatrices for these three products. As with
woolens, the high and low estimates were simultaneously applied across all three
products. For cotton textiles, high and low estimates were drawn from lowest and
highest average yields of the US cotton crop during the 1870s and the much wider
variation reported for Indian cotton producers.76 The final column of Table A4 reports
low {alandj}
the ratio of land input coefficients _______

for the nine imported products. Rice and
high {a }
landj
woolen cloths offer the greatest variation (on the order of one to three or four), followed by sugar and yarn. The lowest variation is found in cotton cloth (shirtings), for
which land made the lowest contribution to the autarky factor valuation.
ROW
was to use the high and low values of the land
The final step of constructing A M
coefficient to recalculate the input requirements for the nine imports. For woolens,
the alternative estimates of input requirements assumed that one-third of the time,
producers of all four woolen products relied only upon domestic sources; another
third of the time, they all relied upon sources from the southern hemisphere; and
the remainder of time they used the mix of sources used to calculate the benchmark
estimates. Likewise, high, low, and benchmark values of the input coefficients for
cotton cloth and cotton textiles were grouped together and the same grouping was
used for rice, brown sugar, and white sugar. Overall, there were 27 possible permuROW
matrix.
tations of the coefficients in the A M
For the calculation of A XJ , raw silk, silkworm eggs, and tea were the exports
that would matter the most for evaluating the contribution of variation in input
coefficients. For the second step (the selection of high and low coefficients),
Senkel (1901) provides a comprehensive discussion of the worldwide market for wool at the turn of the
nineteenth century. The main source countries were Australia and Argentina, so that the input requirement matrix
assumed that South American wool came from Argentina and wool from British colonies came from Australia.
75
The low estimate for land used in rice production also assumes high land productivity in Cochin-China and
that one-half of rice imported into Japan was from China, which used methods that were much less land-intensive
than in Cochin-China.
76
British spinners of cotton yarns, usually imported into Japan, used about three-quarters Indian cotton and
one-quarter longer staple US cotton. Shirtings were woven with yarn made from American cotton only.
74
86
NOVEMBER 2016
Table A5Observed Variation in Input-Output Relationships and Land Usage in Silk and Tea
Silk
Value
High
Benchmark
Low
Tea
Land for
mulberrya
Mulberry
per cocoonb
Cocoon
per silkc
Autarky
valued
Land for
tea shrubse
Autarky
valuef
0.19
0.13
0.08
5.73
5.73
4.84
55.65
55.05
48.13
2.71
2.45
1.79
1.80
3.14
5.08
0.15
0.12
0.10
Hectares per one metric ton of leaves.

Kilograms of mulberry leaves per liter of cocoons.
c
Liters of cocoons per kilogram of silk.
d
per kg).
Per kilogram of raw silk (ryo
e
Hectares per one metric ton of tea leaves.
f
Autarky valuation per kilogram of refined tea.
ji cho
sa (see Cho
, Sho
da, and
Source: No
Ohashi 1979) for the silk-producing prefectures of Akita, Tottori, Fukui,
Toyama, Yamagata, Yamanashi, Fukushima, and Gunma and Knight (1878); Sira-kawa (1868); de Bavier (1874),
Bolle (1898), and Le Gendre (1878, 302) for other estimates of key parameters in silk production
b
we drew on our knowledge of the sericulture industry to identify three crucial production parameters. As noted in the text, the production of silk involves several
steps starting with the growing of mulberry leaves, feeding the mulberry leaves to
silkworms prior to the spinning of cocoons, and then drawing the silk strands from
the cocoons (silk-reeling). Along with the land requirements for mulberry leaf proji Cho
sa reports a range of estimates of two key input-output reladuction, the No
tionships: the amount of mulberry leaves required for the production of one cocoon
and the volume of cocoons required to yield one kilogram of silk. To ensure that we
took account of all information, we augmented the observations available from the
ji Cho
sa with the contemporary observations of several western and Japanese
No
observers. Given the wealth of data from these sources, the high and low values
were simply taken as the first and third quartiles of the observed distributions of
each of the three production parameters. As Appendix Table A5 shows, variation in
the yield of mulberry leaves per hectare of land could be most substantial. Overall,
a high value of these production parameters would result in a 50 percent higher
autarky valuation compared with the low values. Since a modification of any one
of these three production parameters could influence the total factor requirements
for raw silk, we calculated all 27 permutations of them. Finally, the sources indicate
substantial variation in the amount of land required for tea shrubs. The low and
high values used in the A XJ matrices were drawn from the first and third quartiles
ji Cho
sa.
of the distribution found in the No
V. Variation in w a
Factor price data were gleaned from about 20 different local histories in addition
(1973,
to the key surveys of Japanese wages during the Tokugawa era found in Saito
1998). Rather than impose arbitrary distributional assumptions on factor prices, the
procedure randomly sampled from the available data on factor prices with the following sample sizes in parentheses: skilled wages (5), unskilled wages (28), female
wages (24), interest rates (20), land rents in western Japan (136), and land rents in
eastern Japan (17).
VOL. 8 NO. 4
87
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American Economic Journal: Microeconomics 2016, 8(4): 5490

Testing the General Validity

e exploit Japans mid-nineteenth century move from autarky to open trade to

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

Consider a neoclassical economy, called home, where m factors are potentially

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

for all (V, Y) in .

In the trade equilibrium, the consumption vector, C t, will generally be different

for all (V,Y) in .

In a trading equilibrium that allows differences in factor prices across economies,

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

The standard Heckscher-Ohlin formulation assumes identical technologies across

If the factor content of trade is calculated using domestic production techniques,

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

A. Experimental Conditions and Domain

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

For reasons discussed below, our analysis begins in 1865.

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

H0: w a F ik = w a(A i Tk) > 0,

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

at the two-digit industry level. Another distinction is the classification of factors

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

Table 1Factor Input Requirements of Major Exports and Imports

Panel A. Input requirements of major exports (A JX matrix)

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

Table 2Japans Factor Trade Using Domestic Technologies (in millions)

Panel A. Factor exports

Land (tan per year)

Panel B. Factor imports

Land (tan per year)

Panel C. Net factor imports

70.59 120.54 115.15

Land (tan per year)

99.82 129.74 112.17

114.34 136.89 101.66

91.61 152.17 183.02 201.06 226.26 261.91 254.07 256.79

over the period 18501857. At par, one-quarter ryo

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

Panel A. Factor exports

Land (tan per year)

Panel B. Factor imports

Land (tan per year)

Panel C. Net factor imports

0.019 26.41 10.07 19.00

Land (tan per year)

1.51 20.42 17.06 21.25 16.52 19.52 35.72

over the period 18501857. At par, one-quarter ryo

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

Skilled male (days)

26.41 12.28 19.00

9.44 12.25 21.27 20.16 23.84 18.66 23.78 35.72

6.52 10.90 11.62

Land (tan per year)

AMERICAN ECONOMIC JOURNAL: MICROECONOMICS

BERNHOFEN AND BROWN: TESTING HECKSCHER-OHLIN

IV. Concluding Remarks