Evidence on Comparative Advantage from Japan

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International Trade

Course (61 videos)

Evidence on Comparative Advantage from Japan

Is there real-world evidence of the gains from trade? Many studies show that trade and economic growth are positively correlated, but it's less clear whether trade causes growth or growth causes countries to trade. To shed some light, we need a natural experiment, and find one by examining the history of Japan. Japan enforced seclusion policies from about 1639-1859, when they finally opened up to trade. From that point on, trade was mostly free. Japan benefited from exporting goods like tea and silk, and imported goods like cotton textiles and iron. Japan gained not only from trading for these goods, but over time, for these technologies. Of course, the longer-term dynamic gain from trade is that Japan has developed and become a modern economy.

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