On Testing the Law of Comparative Advantage

Kozo Kiyota

No 556, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: This paper reconsiders the law of comparative advantage (Deardorff, 1980, 1994) from an empirical point of view. I show that not only net exports valued at autarky prices but also those valued at free trade prices are needed to test the law of comparative advantage when trade is not balanced. This result brings into question the empirical success of the test of comparative advantage that Bernhofen and Brown (2004) have applied to Japan. I propose a more general test that is consistent with both balanced and unbalanced trade and apply it to Japan. The law of comparative advantage does not necessarily hold in Japan once trade imbalance is taken into account.

Keywords: International Law of Comparative Advantage; Trade Imbalance (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2007
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:556

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