Conventional Theory’s Relevance: Evidence from Japan

Abstract

The formidable surge in the volume of international trade after 1960 stimulated surveys designed to ascertain to what degree the commercial flows among nations reflected the structure of their economies, in other words, how tight was the correlation between international exchanges and the specific attributes of participating nations. In fact, scholars were keen to test the relevance of the conventional Heckscher-Ohlin theory, that is, to what extent did nations’ exports reflect their endowment with factors of production, more specifically, whether their exports used their abundant factors intensively. I try to show that, although most of the tests reached their purpose in that they confirmed the conventional theory’s predictions, in certain cases such as Japan, whose economy is arguably idiosyncratic, factor specificity is more relevant than factor intensity in explaining, not only the country’s international specialization but also the premises of its uncanny 20th century ascendance to the top of the world economy.

Keywords

• factor proportion
• factor specificity
• factor intensity
• labor mobility
• real wage