Abstract
This paper presents a specification of a fundamental and popular model in the theory of international trade, the specific factors model. Data from 24 sectors of the Japanese economy are used. Simulated comparative static elasticities extend basic trade theory by uncovering and postulating the following quantitative properties: 1. (i) near factor price equalization with free trade; 2. (ii) high levels of specialization and trade across trading partners; and 3. (iii) concentrated benefits and diffused costs of protection. Free trade can thus be expected to nearly equalize prices of similar inputs across countries and lead to high levels of specialization and trade.
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