Evidence on Comparative Advantage from Japan

00:05:00
https://www.youtube.com/watch?v=PCqkj4YDTWM

Sintesi

TLDRThe video analyzes the historical gains from trade in Japan following the opening of trade in 1859 after centuries of seclusion. It highlights the correlation between trade and economic growth, using Japan's shift to access international markets as a natural experiment. Key findings suggest that imports and exports significantly impacted Japan's GDP, estimating gains at around 8-9%. This trade transition not only brought immediate economic benefits but also set the foundation for Japan's modernization. Key researchers Daniel Bernhofen and John Brown provided insights into these findings.

Punti di forza

  • 📈 Gains from trade can significantly boost GDP.
  • 🇯🇵 Japan's seclusion ended in 1859, impacting trade.
  • 🍵 Key exports from Japan include tea and silk.
  • 📦 Cheaper imports enriched the Japanese market.
  • 🔍 Study measures trade gains with historical data.
  • 📊 Estimated trade benefits were 8-9% of GDP.
  • 🕰️ Long-term trade effects contributed to modernization.
  • 📝 Research conducted by Bernhofen and Brown.
  • 🌍 Importance of trade in economic development.
  • 🔎 Search 'opening of Tokugawa Japan' for more history.

Linea temporale

  • 00:00:00 - 00:05:00

    The discussion begins by addressing the relationship between trade and economic growth, highlighting the challenge of determining whether trade causes growth or vice versa. To explore this, the narrative shifts to Japan's historical context, specifically its stringent seclusion policies established in 1639 and the subsequent opening of trade in 1859. The transition marked a significant change as Japan began exporting goods such as tea and silk while also benefiting from inexpensive imports like cotton textiles and advanced technologies. Research seeks to quantify the economic gains from this trade liberalization for Japan from 1851 to 1853, aiming to measure the impact of exports and the advantages of cheaper imports. Despite acknowledging potential inaccuracies in data and valuation methods for new goods, it is concluded that trade led to measurable gains, estimated at around 8-9% of Japan's GDP, alongside long-term benefits that facilitated Japan's modernization, underscoring the significance of opening up to trade.

Mappa mentale

Video Domande e Risposte

  • What was Japan's trade policy before 1859?

    Japan had implemented tight seclusion policies since 1639, limiting foreign trade.

  • What triggered Japan to open up its trade?

    Political reasons in 1859 led Japan to open up to trade.

  • What were the main exports of Japan after opening up?

    The two most significant exports were tea and silk.

  • What kind of goods did Japan import after opening up?

    Japan imported various goods, including cotton textiles, iron products, glass boots, butter, woolens, and muskets.

  • How much did the gains from trade contribute to Japan's GDP?

    The upper bound measure for gains from trade was about 8-9% of Japan's GDP.

  • Who conducted the research on Japan's trade gains?

    The research was conducted by Daniel Bernhofen and John Brown.

  • What should I search for to learn more about Japan's trade history?

    You can search for 'opening of Tokugawa Japan'.

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Scorrimento automatico:
  • 00:00:01
    We've already considered some of the theory of comparative advantage.
  • 00:00:05
    So now, let's take a look at the evidence on gains from trade.
  • 00:00:11
    Plenty of articles show that trade and economic growth are positively correlated.
  • 00:00:15
    That is, they move together.
  • 00:00:17
    But it's hard to separate out how much is trade causing growth
  • 00:00:20
    or how much is growth causing trade.
  • 00:00:23
    So, ideally, what we would like is some kind of natural experiment
  • 00:00:26
    where there is an exogenously given increase in the amount of trade,
  • 00:00:30
    and then we can see how much economic output responds.
  • 00:00:36
    And for such an experiment, we can turn to the earlier history of Japan.
  • 00:00:42
    Japan had instituted fairly tight seclusion policies since 1639.
  • 00:00:48
    In part, they were afraid of imperialism,
  • 00:00:50
    and, also, they were afraid
  • 00:00:52
    that Christianity would obtain a foothold in their country.
  • 00:00:55
    So, for over two centuries,
  • 00:00:56
    there was really just a very small amount of foreign trade entering Japan.
  • 00:01:01
    But then, for political reasons, come 1859,
  • 00:01:04
    Japan is suddenly opened up to trade,
  • 00:01:07
    and, after that point, trade is mostly free.
  • 00:01:10
    This is possibly the kind of natural experiment we've been looking for.
  • 00:01:16
    One benefit of the new trade
  • 00:01:17
    is that Japan was able to export to the rest of the world,
  • 00:01:21
    and, at that time, the two most significant Japanese exports
  • 00:01:25
    were tea and silk.
  • 00:01:29
    The new trade is also a story about imports.
  • 00:01:32
    For instance, in Europe, due to the Industrial Revolution,
  • 00:01:35
    cotton textiles had become much cheaper than they were in much of Asia.
  • 00:01:40
    Iron production also was much more efficient
  • 00:01:42
    in, say, England than in Japan at the time.
  • 00:01:46
    Japan was able to gain from trading for the goods,
  • 00:01:48
    but also, over time, trading for those technologies.
  • 00:01:54
    Japan was also able to import a lot of new goods
  • 00:01:56
    that they simply hadn't had before, --
  • 00:01:58
    and this includes glass boots, butter, woolens and also muskets.
  • 00:02:05
    So, the question asked in one research paper is this:
  • 00:02:08
    For the years 1851 to 1853,
  • 00:02:12
    how much extra income for Japan would, in fact, be equal
  • 00:02:16
    to the gains from trade that Japan enjoyed from opening up trade
  • 00:02:20
    with the rest of the world?
  • 00:02:22
    In essence, this question is trying to measure the benefits
  • 00:02:25
    from the much freer trade.
  • 00:02:28
    A simple way to think about what's going on
  • 00:02:30
    is that we're trying to add up the gains from the Japanese exports,
  • 00:02:34
    and then sum those with the ability to bring in cheaper imports,
  • 00:02:38
    again, through trade.
  • 00:02:41
    These measures, of course, are somewhat inexact.
  • 00:02:44
    For instance, measuring the value of exports and imports
  • 00:02:47
    is based on market prices.
  • 00:02:49
    But market prices, as we know, they only measure value at the margin
  • 00:02:53
    for the final increment of a good or service which is traded in the market.
  • 00:02:58
    Also, this is a study of the middle of the 19th century,
  • 00:03:01
    and the data are, to some extent, incomplete or imperfect.
  • 00:03:05
    Finally, it is hard to value new goods using this method.
  • 00:03:09
    So, we do have data on the price of new goods in the post-trade regime.
  • 00:03:13
    But, from that, we're somehow trying to extrapolate
  • 00:03:16
    what was the value of those new goods in the pre-trade regime,
  • 00:03:19
    and that can be hard to do.
  • 00:03:22
    Still, for all of these problems,
  • 00:03:23
    we are getting some reasonable measure of the gains from freer trade here.
  • 00:03:30
    And what is found in the study is this:
  • 00:03:31
    that there is an upper bound which we can measure on the gains from trade.
  • 00:03:36
    And that upper bound, at the time, was about 8-9% of Japan's GDP.
  • 00:03:44
    Perhaps most importantly,
  • 00:03:45
    there is a longer-term dynamic gained from having this trade.
  • 00:03:49
    That is, over time, it enabled Japan to develop and become a modern country
  • 00:03:53
    as, for instance, is shown here.
  • 00:03:55
    This is a picture of Yokohama and Mount Fuji.
  • 00:03:59
    Had Japan not opened itself up to trade,
  • 00:04:02
    this eventual brighter future for Japan probably would not have been possible.
  • 00:04:07
    And this is not captured in that number, that upper bound of 8-9% of GDP.
  • 00:04:14
    The main results here are drawing on a very good and important research paper
  • 00:04:18
    by Daniel Bernhofen and John Brown, and that is called
  • 00:04:21
    "Empirical Assessment of the Comparative Advantage Gains from Trade:
  • 00:04:25
    Evidence from Japan."
  • 00:04:27
    Those same two writers have another piece, somewhat more technical, called
  • 00:04:31
    "A Direct Test of the Theory of Comparative Advantage:
  • 00:04:34
    The Case of Japan."
  • 00:04:36
    If you'd like to read about the history of Japan's opening up to trade
  • 00:04:39
    with the outside world,
  • 00:04:41
    one place you could start is simply to google "opening of Tokugawa Japan."
Tag
  • Japan
  • trade
  • economic growth
  • comparative advantage
  • imports
  • exports
  • GDP
  • modernization
  • Tokugawa
  • historical evidence